Scrambling to keep away from defaulting on its money owed, cash-strapped China Evergrande Group mentioned on Wednesday it plans to promote a 9.99 billion yuan ($1.5 billion) stake in Shengjing Financial institution Co Ltd to a state-owned asset administration firm.
Shengjing Financial institution, one of many primary lenders to Evergrande, had demanded that each one internet proceeds from the disposal be used to settle the monetary liabilities of the property developer because of the lender, Evergrande mentioned in an trade submitting.
That requirement means that Evergrande, which missed a bond curiosity cost final week, can be unable to make use of the funds for different functions comparable to one other curiosity cost to offshore bondholders of $47.5 million due on Wednesday.
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The cost deadline is being carefully watched by buyers because the developer’s subsequent massive take a look at in public markets. Shares of Evergrande rose as a lot as 15% on Wednesday.
Evergrande has quickly turn out to be China’s greatest company headache because it teeters between a messy meltdown with far-reaching impacts, a managed collapse or the much less possible prospect of a bailout by Beijing.
The 1.75 billion shares, representing 19.93% of the issued share capital of the financial institution, can be offered for five.70 yuan apiece to Shenyang Shengjing Finance Funding Group Co Ltd, a state-owned enterprise concerned in capital and asset administration, Evergrande mentioned in its submitting.
Shenyang Shengjing’s stake within the financial institution can be elevated to twenty.79% after the deal to turn out to be the financial institution’s largest shareholder. Evergrande’s stake within the financial institution can be diminished to 14.75% from 34.5%.
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“The corporate’s liquidity subject has adversely affected Shengjing Financial institution in a cloth manner,” Evergrande Chairman Hui Ka Yan mentioned within the assertion.
“The introduction of the purchaser, being a state-owned enterprise, will assist stabilise the operations of Shengjing Financial institution and on the similar time, assist enhance and keep the worth of the 14.75% curiosity in Shengjing Financial institution retained by the corporate.”
As of the primary half final yr, the financial institution had 7 billion yuan in loans to Evergrande, making it the third-largest onshore lender to the cash-strapped firm, in line with a report by brokerage CCB Worldwide final week, citing information reviews.
The monetary well being of Shengjing Financial institution has come below the highlight since Might, after monetary information outlet Caixin reported that China’s prime banking watchdog was investigating linked transactions value greater than 100 billion yuan ($15.45 billion) between Evergrande and the financial institution.
On July 5, Evergrande mentioned in an announcement its monetary enterprise with Shengjing complied with authorized necessities.
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Days after that announcement, China’s northern metropolis of Shenyang, the place Shengjing relies, inspired native state-owned corporations to extend stakes within the financial institution.
The Shenyang authorities mentioned it valued reforms at Shengjing Financial institution and would strengthen the Communist Occasion management within the financial institution to assist it become “a superb financial institution,” in line with an announcement in July.
Beijing is prodding government-owned corporations and state-backed property builders to buy a few of embattled China Evergrande Group’s property, folks with information of the matter instructed Reuters on Tuesday.
Shengjing reported a internet revenue of 1.03 billion yuan within the first half of 2021, down 63.6% from a yr earlier, citing the affect of COVID-19, a decline in internet curiosity revenue and elevated provisions for impairment losses of property attributable to “elevated uncertainty of enterprise operations”.
The financial institution’s non-performing mortgage ratio stood at 3.04% by the end-June, greater than the industry-wide common of practically 2%.
(Reporting by Donny Kwok and Anne Marie Roantree; further reporting by Cheng Leng in Beijing; Enhancing by Stephen Coates & Simon Cameron-Moore)