China Evergrande sells Guanghui stake to Shenergy in asset disposal plan after breaching central bank’s ‘red lines’ on debt

China Evergrande Group, the world’s most indebted real estate developer, has agreed to sell an investment a little more than two years after buying it, part of its asset disposal programme to generate cash and repay more than 835.5 billion yuan (US$122 billion) of borrowings.

The Guangzhou-based developer said it would sell its 41 per cent stake in Xinjiang Guanghui Industry Investment Group, an energy-to-property conglomerate based in north-western China, for 14.9 billion yuan to Shanghai’s electricity generator Shenergy. Evergrande bought the stake in 2018 for 14.5 billion yuan.

“Shenergy will take over all of the shares bought by Evergrande in 2018 and become Xinjiang Guanghui’s second-largest shareholder,” Guanghui said in a filing to Shanghai’s stock exchange on Sunday. The disposal enables it to focus more on its core business and achieve “long-term stable and healthy development,” Evergrande said separately in a filing to the Hong Kong bourse.

Evergrande, China’s largest property developer by sales, is attempting to slim down after facing the risk of having to cough up 130 billion yuan by the first quarter of next year if demanded by investors who had put money into its Hengda unit in anticipation of its successful takeover of Shenzhen Special Economic Zone (SEZ) Real Estate & Properties Group.

On the same day, Evergrande’s chairman was photographed in Beijing at a signing ceremony with representatives from more than a dozen of Hengda’s investors. They included Zhang Jindong, chairman of Suning.com, one of China’s largest home-appliance retailers, and Wang Wenyin, a copper tycoon who controls the private Amer International Group.