Evergrande to sell $1.55 billion bank stake to state company
Shanghai, China, Sep 29 (EFE).- Chinese real estate giant Evergrande on Wednesday announced it would sell a 19.93 percent stake in commercial Shengjing Bank to a state-owned conglomerate for 9.99 billion yuan ($1.55 billion).
After the transaction, its stake in Shengjing Bank will drop from 34.5 percent to 14.57 percent, Evergrande said in a statement sent to the Hong Kong Stock Exchange.
Evergrande will transfer 1.75 billion non-publicly traded domestic shares to the buyer at a unit price of 5.7 yuan.
Shengjing Bank has made it conditional that all net proceeds from the disposal be used to settle the real estate giant’s financial liabilities due to the bank, Evergrande said in the statement.
The stake has been acquired by Shenyang Shengjing Finance Investment Group Co. Ltd, a state-owned enterprise made up of different institutions from both the northeastern city of Shenyang, where the bank is headquartered, and the province to which it belongs, Liaoning.
“The company’s liquidity issue has adversely affected Shengjing Bank in a material way,” Evergrande said in the statement.
“The introduction of the purchaser, being a state-owned enterprise, will help stabilize the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75 percent interest in Shengjing Bank retained by the company,” it added.
Wednesday’s news was well received by investors on the Hong Kong Stock Exchange with Evergrande’s shares rising more than 13.1 percent shortly before 11 am.
In May, the financial news portal Caixin reported that Chinese banking regulators were investigating transactions of more than 100 billion yuan in between Evergrande and Shengjing Bank, which holds “large amounts” of bonds issued by Evergrande, until now, the bank’s biggest shareholder.
Although Evergrande assured that all its dealings with Shengjing Bank complied with Chinese laws, shortly afterwards the deputy mayor of Shenyang asked local state-owned companies to gradually increase their stake in the banking institution to help it become “a good bank.”
Evergrande, which has a total liability of more than $300 billion, was due to pay interest of $47.5 million on some offshore bonds on Wednesday, although it has yet to confirm if it will make the payment.
On Sep. 23, the real estate company failed to meet an interest payment of $83.5 million on dollar-denominated bonds.
It is still unknown if the company intends to make the payment in the 30-day grace period after which a formal default will be declared. EFE