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Evergrande to sell 20% of bank’s shares to state-owned firm for $1.5 billion

Evergrande to sell 20% of bank’s shares to state-owned firm for $1.5 billion
Jordan
Major
2 months ago
3 mins read

In a deal worth $1.5 billion, a Chinese state-owned enterprise agreed to purchase the majority of China Evergrande Group’s stake in a commercial bank, marking the latest indication that the country’s authorities are attempting to assist the property giant in resolving some of its financial difficulties.

A unit of Evergrande intends to sell almost 20% of Shengjing Bank Co Ltd, which is headquartered in the Liaoning provincial city of Shenyang, to a business whose shareholders include the local office of China’s State-Owned Assets Supervision and Administration Commission, according to a statement released Wednesday, the Wall Street Journal reports

In particular, the firm, which is struggling to avoid defaulting on its debts, intends to sell 9.99 billion yuan ($1.5 billion) in shares to the state-owned asset management firm to prevent defaulting on its obligations.

Announcement came via Hong Kong Exchange

In the face of a new bond interest payment deadline on Wednesday, the property behemoth, burdened by a massive $300 billion debt, has been trying to raise funds.

On Wednesday, Evergrande disclosed in a filing with the Hong Kong exchange that it will sell the 1.75 billion shares or 19.93% stake in Shengjing Bank that it now holds to the Shenyang Shengjing Finance Investment Group for 5.70 yuan a share.

Upon completion of the deal, Shenyang Shengjing’s ownership interest in Shengjing Bank will rise to 20.79%, making it the lender’s biggest stakeholder.

Interestingly, market participants are keeping a close eye on the company to see whether it can make its $47.5 million interest payment due on Wednesday. The property company had previously missed one important coupon payment of $83.5 million last week, which was due on an offshore bond with a face value of $2 billion due in March 2022.

Prospective asset buyers emerge

While China Evergrande faces another payment deadline today for a $47.5 million offshore coupon, a small number of potential buyers for the company’s assets have surfaced in the Chinese mainland.

On the surface Beijing appears to be pressuring state-owned enterprises and state-backed property developers to acquire some of Evergrande’s other properties, with attention being given to both political and economic reasons, according to a Reuters report citing unidentified sources.

By way of explanation, government-backed developers Vanke, China Jinmao Holdings, and China Resources Land are among the companies approached to buy Evergrande’s assets. 

Meanwhile, in Guangzhou, a small number of state-owned companies have already completed due diligence on properties. For example, Guangzhou City Construction Investment Group is close to purchasing Evergrande’s Guangzhou FC Soccer stadium and adjacent residential developments. 

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Jordan Major
Author

Jordan is an investor and market analyst. He's passionate about stocks, ETFs, blockchain, and digital assets. At Finbold.com, he delves into the technicalities to obtain future trends for new market traders and gives insights into user-friendly platforms for beginners.

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