Embattled property developer China Evergrande Group raised about HK$1.12 billion (US$144 million) by further selling down its stake in internet company HengTen Networks Group as it faces a cascading series of interest payments on its offshore debt.
Evergrande sold 530 million shares in a series of sales since November 4, reducing its stake in Hong Kong-based HengTen from 26.55 per cent to 20.82 per cent, according to regulatory filings with the Hong Kong stock exchange.
The world’s most indebted developer, Evergrande held a majority stake in HengTen as recently as January, but has significantly reduced its stake in recent months as part of a series of assets sales to try to manage its 1.97 trillion yuan (US$308 billion) in total liabilities.
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HengTen’s other big shareholders include its executive chairman Ke Liming and Tencent Holdings.
HengTen’s shares are down sharply this year, losing about HK$132 billion in market capitalisation since February 17 when it hit its highest market cap in nearly a decade. The company’s shares closed 4.9 per cent higher at HK$2.15 on Tuesday following the Evergrande share sale.
Disclosure of the share sales comes as Bloomberg reported on Tuesday that some holders of offshore debt issued by an Evergrande unit had not received coupon payments due November 6.
Shenzhen-based Evergrande missed several interest payments on its offshore debt in September in October, but bought itself more time by making those payments shortly before a 30-day grace period was set to expire for its bonds.
Founded by Chinese tycoon Hui Ka-yan in 1996 in Guangzhou, Evergrande has been racing to sell off assets, from properties under development to a stake in a Northeast China-based bank, to ease its liquidity crunch and repay suppliers – with many saying they have not been paid for months.
In recent weeks, Evergrande has tried to put a good face on the situation, posting photos on its WeChat account of construction workers at its developments and saying it continues to deliver flats to homebuyers.
The developer is far from out of the woods as it faces a November 11 deadline to make about US$148 million in overdue interest payments and has additional payments on its offshore bonds set to come due later this month and in December.
Other developers, including Fantasia Holdings Group, Modern Land (China) and Sinic Holdings Group, have defaulted on their debt in recent weeks, heightening concerns about the high levels of debt in China’s property sector.
Chinese regulators instituted the “three red lines” policy for developers last year in an attempt to stave off speculative property price bubbles. The policy restricts the ability of developers who fail to meet those measures to continue to borrow from banks, which has choked off an important of source liquidity for Evergrande and other indebted developers.
The US Federal Reserve overnight warned that stress in China’s real estate sector could pose “some risks” to the American financial system, particularly if those stresses spill over to other parts of the mainland economy.
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