Saturday, October 23, 2021

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

HONG KONG – To avoid defaulting on its loans, cash-strapped China Evergrande Group on Wednesday said it plans to hold a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank Co Ltd, a state-owned asset management company. Company is to be sold.

One of Evergrande’s main lenders, Shengjing Bank, had demanded that all net proceeds from the settlement be used to settle the property developer’s financial liabilities due to the lender, Evergrande said in an exchange filing.

That requirement suggests that Evergrande would be unable to use the funds for other purposes such as interest payments to offshore bondholders.

Evergrande missed paying bond interest due on Wednesday, two bondholders said, its second unpaid offshore debt obligation in a week, though the company made partial payments to some of its onshore investors on Thursday.

After missing $83.5 million in coupon payments last Thursday, the company, at the bottom of a pile of $305 billion in debt, was due on Wednesday to make a $47.5 million bond interest payment on its 9.5 percent March 2024 bond.

Evergrande has quickly become China’s biggest corporate headache as it rages amid far-reaching ramifications for a messy recession, a managed collapse, or a bailout by Beijing less likely.

Evergrande said in its filing that 1.75 billion shares, representing 19.93 percent of the bank’s issued share capital, would be sold for 5.70 yuan to Shenyang Shengjing Finance Investment Group Co Ltd, a state-owned enterprise. .

Evergrande construction site
Cranes stand at a construction site near the headquarters of China Evergrande Group in Shenzhen, Guangdong Province, China on September 26, 2021. (Ellie Song/Reuters)

After the deal to become the largest shareholder of the bank, Shenyang Shengjing’s stake in the bank will be increased to 20.79 percent. Evergrande’s stake in the bank will be reduced from 34.5 per cent to 14.75 per cent.

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As of the first half of last year, Evergrande had 7 billion yuan in debt with the bank, which was 1.19 percent of the lender’s loan book, according to a report by brokerage CCB International last week, citing news reports.

Shengjing Bank’s financial health has come under the spotlight since May, when financial news outlet Caixin reported that China’s top banking watchdog was investigating linked transactions between Evergrande and the bank worth more than 100 billion yuan ($15.45 billion). Was.

On July 5, Evergrande said in a statement that its financial business with Shengjing complies with legal requirements.

Days after that announcement, China’s northern city of Shenyang, where Shengjing is located, encouraged local state-owned companies to increase stake in the bank.

Shengjing reported a net profit of 1.03 billion yuan in the first half of 2021, down 63.6 percent from a year earlier, citing the impact of COVID-19, declining net interest income, and assets Due to the increase in provisions for the loss of “increased uncertainty of business operations”.

The bank’s non-performing loan ratio stood at 3.04 per cent at the end of June, higher than the industry-wide average of around 2 per cent.

Epoch Times employees contributed to this report

Reuters

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This News Originally From – The Epoch Times

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