Evergrande pares Shengjing Bank stake for US$1.55 billion as distressed developer buys more time to repay bondholders

China Evergrande Group is selling part of its stake in a bank in northeastern China to repay debt and unshackle itself from US$305 billion of liabilities. The distressed developer is said to have asked for more time to service a second offshore bond in as many weeks amid a cash squeeze.

The Shenzhen-based developer signed an agreement to sell 19.93 per cent of Shengjing Bank for just under 10 billion yuan (US$1.55 billion) to a state-owned enterprise Shenyang Shengjing Finance Investment Group, according to a Hong Kong exchange filing on Wednesday.

The sale will trim Evergrande’s stake in the non-public shares of the lender to 14.6 per cent, it added. Evergrande will not get any of the cash from the sale, as Shengjing Bank has demanded all the net proceeds to be used to settle the developer’s liabilities with the lender, according to the statement.

The transaction represents the latest asset sale by founder Hui Ka-yan to save his property empire from collapsing, after it missed several interest payments this month to contractors, suppliers and lenders. More deadlines are approaching on its local and offshore bond obligations.

The company has not paid the semi-annual interest on a US dollar-denominated bond maturing in March 2024 due on Wednesday as of 7pm Hong Kong time, according to a person close to some noteholders. They had expected the developer to rely on the 30-day grace to buy time and raise cash, the person told the Post.

Evergrande this summer sold off a variety of assets, including 25.17 billion yuan in property and a smaller stake in Shengjing Bank, to pay obligations its suppliers and contractors and improve its cash flow. Shares of Shengjing Bank were suspended from trading on Wednesday for the announcement.