Its shares jump more than 10%
Taken from El País
The heavily indebted Chinese real estate giant Evergrande announced today the sale of 19.93% of its shares in Shengjing Bank to a state-owned conglomerate for 9.993 billion yuan (US$1.545 billion, €1.322 billion).
In a statement to the Hong Kong Stock Exchange, Evergrande indicated that, following the transaction, its stake in Shengjing Bank will decrease from 34.5% to 14.57%. Evergrande will transfer 1.753 billion shares to the buyer at a price of 5.7 yuan (US$0.88, €0.75) per share.
However, these funds are unlikely to end up in Evergrande's coffers, as Shengjing Bank stipulated as a condition for approving the transaction that Evergrande's net profits be used to repay its debts to the bank.
The conglomerate that acquired the stake is identified in the document as Shenyang Shengjing Finance Investment Group, a publicly traded group comprised of various institutions from both the northeastern city of Shenyang—where the bank is headquartered—and the province of Liaoning.
The stated reason for the transaction is that Evergrande's "liquidity problems have adversely and materially affected Shengjing Bank."
In May, the business news website Caixin reported that Chinese banking regulators were investigating more than 100 billion yuan (US$15.461 billion, €13.227 billion) in transactions between Evergrande and Shengjing Bank, which holds "large amounts" of bonds from its parent company and, until now, its main shareholder.
Although Evergrande asserted that all its operations with Shengjing Bank complied with regulations, shortly afterward the deputy mayor of Shenyang asked local state-owned companies to gradually increase their stake in the bank to accelerate its transformation into a "good bank."
In a statement this morning, Evergrande affirmed that the state-owned company's acquisition of a stake will help stabilize the bank's operations and also help increase and maintain the value of the stake the real estate company will retain.
The news was well received by investors on the Hong Kong Stock Exchange, with Evergrande's shares rising by more than 13.1%.
Evergrande, with total liabilities exceeding $300 billion (approximately €256 billion), is due to make a $47.5 million (€40.6 million) interest payment today on a batch of offshore bonds, though it has not yet announced whether it will make the payment.
Last Thursday was the deadline for paying another $84 million (approximately €71 million) on a separate package of bonds traded abroad, and it remains unclear whether the company intends to make the payment. Since then, the company has entered a 30-day grace period before it is officially considered to be in default.
Downgrade by Fitch
The Fitch credit rating agency downgraded the long-term issuer rating of the heavily indebted Chinese real estate group Evergrande from 'CC' to 'C', the third lowest level on its scale, after the company failed to make a payment on interest on offshore bonds within the agreed timeframe.
In a statement, Fitch explained that the action also affects two of the conglomerate's subsidiaries, Hengda Real Estate Group and Tianji Holding Limited.
The decision was made after Evergrande "likely" – it has not yet commented on the matter – missed the deadline last Thursday to pay nearly $84 million in interest on a package of offshore bonds, entering a 30-day grace period before it is officially considered in default.
