Selling bank shares and facing payment of bonds

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On Tuesday, September 21, 2021, Qidong, Jiangsu Province, China, a residence in the Venice Real Estate and Tourism Development Project of China Evergrande Group.

Seven Gods | Bloomberg | Getty Images

Before another interest payment deadline, Chinese developers Evergrande Announced the sale of a US$1.5 billion (99.9 billion yuan) stake in Shengjing Bank to a state-owned asset management company.

The real estate giant has more than $300 billion in debt and has been struggling to raise funds as it faces a $47.5 million bond interest payment deadline on Wednesday. The troubled real estate giant also owes money to banks and suppliers.

In a document submitted to the Hong Kong Stock Exchange on Wednesday morning, Evergrande stated that it has reached an agreement to sell its 1.75 billion shares of Shengjing Bank to Shenyang Shengjing Financial Investment Group at a price of 5.70 yuan per share. These shares accounted for 19.93% of the bank’s issued share capital.

Evergrande has already sold 1 billion yuan worth of shares in Shengjing Bank.

Evergrande said in a statement that its liquidity problems have “seriously affected” Shengjing Bank. Evergrande stated that the introduction of the buyer-the state-owned Shenyang Shengjing Financial Investment Group-will “stabilize the operation of the bank.”

In early Wednesday trading, Evergrande’s share price in Hong Kong rose nearly 10%.

Another bond interest due on Wednesday

Evergrande’s troubles surfaced After it warned twice in September that it might default on debt. Concerns about whether the company will default have disrupted global markets-even though the US stock market rebounded last weekend.

The world’s most indebted real estate company A key $83.5 million coupon payment has been missed last week, On the offshore bonds in March 2022, valued at US$2 billion. U.S. dollar bonds are usually held by foreign investors.

Evergrande has remained silent on the payments due last week and has not issued any announcements so far.

However, unless the company fails to pay within 30 days of the due date, it will not technically default.

The market is closely watching whether the company will pay US$47.5 million in interest due next Wednesday to purchase US$1 billion of bonds due in March 2024.

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As investors withdrew from Evergrande bonds and as prices plummeted, the yield on this 7-year bond has soared to 90% from about 14% at the beginning of this year. The rate of return is the opposite of the price trend.

For the rest of this year, Evergrande will pay interest every month in October, November and December.

Analysts said the company may give priority to domestic investors, They are the main holders of onshore bonds-not foreign investors who mainly hold offshore bonds.

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