Evergrande Raises $154 Million Paring Stake in Key Bank Unit

(Bloomberg) -- China Evergrande Group raised about 1 billion yuan ($154 million) after paring its stake in Shengjing Bank Co., as the real estate conglomerate continues to downsize its sprawling empire to stave off a liquidity crisis.

Evergrande Nan Chang sold about 167 million shares in Shengjing Bank at 6 yuan apiece, the same as its purchase price in 2019, to two state-backed units of northeastern Shenyang city, the Chinese lender said in an exchange filing on Tuesday. It said its board would support key local state-owned enterprises to gradually increase their holdings in batches and “adjust the equity structure to become the bank of the government.”

The deal underscores the mounting pressure on billionaire Hui Ka Yan to spin off and sell assets to pay down a mountain of debt. Evergrande’s 36% stake in Shengjing Bank is among its most valuable financial assets, worth about $2.8 billion. That holding has become less appealing as the regulator toughens oversight on dealings such as preferential lending and bond purchases between banks and their largest shareholders.

A report in May from Caixin Media’s WeNews that the watchdog was examining more than 100 billion yuan of transactions between the two rocked Evergrande’s stocks and bonds. Evergrande is the bank’s biggest shareholder. In a separate statement on Tuesday, Shengjing Bank said its first-half profit may fall between 60% to 70% due to a decline in net interest income and higher impairment loss of assets.

Evergrande investors were unnerved on Tuesday after Hui unexpectedly stepped down as chairman of the group’s onshore unit Hengda Real Estate Development Co. Shares of Evergrande fell 4.3% in Hong Kong, taking this year’s decline to 65%. The 8.75% note due in 2025 dropped 2.2 cents on the dollar to 39.6 cents, a record low.

The government has been pushing to curb Evergrande’s borrowing in hopes of putting a stop to the notion that any company can be “too big to fail.” With more than $300 billion of liabilities, Evergrande’s fate has broader implications for China’s $50 trillion financial system and the nation’s banks, trusts and millions of home owners.

Officials from China’s top financial regulator told Hui in a private meeting at the end of June that he should solve his company’s debt problems as quickly as possible, emphasizing the need to avoid major economic shocks, people familiar with the matter said last month. Hui told the officials he’s been speaking with local governments as he looks for a solution, one of the people said, asking not to be identified discussing sensitive information.

Meanwhile, Evergrande Group President Xia Haijun sold 10 million shares in its property services unit and 3 million shares in its new energy vehicle arm last week, according to disclosure filings. 

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With assistance from Bloomberg