Evergrande Investor Leans Toward Seeking $3 Billion Payment

(Bloomberg) -- China Evergrande Group’s largest strategic investor is leaning toward demanding repayment of the $3.4 billion it’s sunk into the embattled developer, according to people familiar with matter, adding pressure on the company as it races to cut its massive debt load.

Investors linked to Shandong Hi-Speed Group, a state-owned conglomerate based in northeastern Jinan, can demand to be repaid if Evergrande fails to get a long-delayed backdoor listing of its main real estate assets in China by Jan. 31. Negotiations to waive those rights are ongoing, though Shandong Hi-Speed is keen to recoup the money, the people said, asking not to be named discussing private deliberations. A final decision hasn’t been made.

The provincial State-owned Assets Supervision and Administration Commission, an arm of the State Council with oversight of Shandong Hi-Speed, has balked at a deal concerned over possible losses, one of the people said. Any agreement would require its approval.

Evergrande is in talks with Shandong Hi-Speed about turning the investment into common equity and expects an outcome in the near term, the developer said in response to questions from Bloomberg News. The junk-rated company’s proposals have also included the repayment of a portion of the investment, one of the people said.

The world’s most indebted developer is under pressure from creditors and regulators to reduce $120 billion in debt, about $5.8 billion of which matures in the next two months. Evergrande bought itself some breathing room last month when it convinced a clutch of strategic investors to forgo their right to demand back 86.3 billion yuan. Shandong Hi-Speed is among those who didn’t agree to the September deal.

Shandong Hi-Speed Group couldn’t immediately comment. Representatives at their listed company Shandong Hi-Speed Co. said the company is paying close attention to the situation and would maintain active communication with related companies.

Calls to Shandong’s SASAC went unanswered.

Supervised by the provincial SASAC, the investor group made up of four companies involved in communications and infrastructure participated in Evergrande’s 2017 fund raisings.

Shandong Hi-Speed is one of a very few state-owned strategic investors in Evergrande. With total assets of 730 billion yuan, the conglomerate is the biggest company by assets in the province and oversees a sprawling business of road, hi-speed railways, banking and investments, according to its website. It also develops land plots related to communications projects.

As negotiations with its strategic investors continue, the developer has been racing to raise funds to meet upcoming debt obligations -- cutting prices on new homes, pursuing listings for its property-management and electric-vehicle units and tapping markets for fresh capital.

Its shares slumped in Hong Kong on Wednesday when a share placement fell well short of target. Evergrande found demand for just half of a planned $1 billion equity offering, even after selling shares at a steep 14.7% discount.

©2020 Bloomberg L.P.

With assistance from Bloomberg