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InvestmentsChina Evergrande to sell $1.5 billion stake in Shengjing Bank to state...

China Evergrande to sell $1.5 billion stake in Shengjing Bank to state firm By Reuters


© Reuters. FILE PHOTO: Cranes stand at a development website close to the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song

By Donny Kwok and Anne Marie Roantree

HONG KONG (Reuters) -Scrambling to keep away from defaulting on its money owed, cash-strapped China Evergrande Group mentioned on Wednesday it plans to sell a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank Co Ltd to a state-owned asset administration firm.

Shengjing Bank, one of many principal lenders to Evergrande, had demanded that every one internet proceeds from the disposal be used to settle the monetary liabilities of the property developer due to the lender, Evergrande mentioned in an change submitting.

That requirement means that Evergrande, which missed a bond curiosity fee final week, shall be unable to use the funds for different functions equivalent to one other curiosity fee to offshore bondholders of $47.5 million due on Wednesday.

The fee deadline is being intently watched by traders 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 probably prospect of a bailout by Beijing.

The 1.75 billion shares, representing 19.93% of the issued share capital of the financial institution, shall be bought for five.70 yuan apiece to Shenyang Shengjing Finance Investment Group Co Ltd, a state-owned enterprise concerned in capital and asset administration, Evergrande mentioned in its submitting.

Shenyang Shengjing’s stake in the financial institution shall be elevated to 20.79% after the deal to turn out to be the financial institution’s largest shareholder. Evergrande’s stake in the financial institution can be diminished to 14.75% from 34.5%.

“The company’s liquidity issue has adversely affected Shengjing Bank in a material way,” Evergrande Chairman Hui Ka Yan mentioned in the assertion.

“The introduction of the purchaser, being a state-owned enterprise, will help stabilise the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75% interest in Shengjing Bank retained by the company.”

As of the primary half final 12 months, the financial institution had 7 billion yuan in loans to Evergrande, making it the third-largest onshore lender to the cash-strapped firm, in accordance to a report by brokerage CCB International final week, citing information studies.

The monetary well being of Shengjing Bank has come underneath the highlight since May, after monetary information outlet Caixin reported that China’s high 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 a press release its monetary enterprise with Shengjing complied with authorized necessities.

Days after that announcement, China’s northern metropolis of Shenyang, the place Shengjing relies, inspired native state-owned corporations to enhance stakes in the financial institution.

The Shenyang authorities mentioned it valued reforms at Shengjing Bank and would strengthen the Communist Party management in the financial institution to assist it become “a good bank,” in accordance to a press release in July.

Beijing is prodding government-owned corporations and state-backed property builders to buy a few of embattled China Evergrande Group’s property, individuals with information of the matter advised Reuters on Tuesday.

Shengjing reported a internet revenue of 1.03 billion yuan in the primary half of 2021, down 63.6% from a 12 months earlier, citing the impression of COVID-19, a decline in internet curiosity earnings and elevated provisions for impairment losses of property due to “increased uncertainty of business operations”.

The financial institution’s non-performing mortgage ratio stood at 3.04% by the end-June, greater than the industry-wide common of almost 2%.

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