Major Evergrande Backer Chinese Estates May Sell Its Shares

(Bloomberg) -- Chinese Estates Holdings Ltd. sold shares in China Evergrande Group and said it may exit all its holdings, a major withdrawal of support from one of the embattled developer’s long-time backers.

Chinese Estates sold 108.9 million Evergrande shares for HK$246.5 million ($31.7 million) from Aug. 30 to Sept. 21, according to a statement to the Hong Kong exchange Thursday. The Hong Kong real estate firm may sell its remaining 751.1 million Evergrande shares, adding it could take a loss of about HK$9.5 billion if it sold all the stock.

The moves by Chinese Estates adds to sales by its Chief Executive Officer Chan Hoi Wan, the wife of billionaire Joseph Lau, who has been offloading shares in the world’s most-indebted developer as it edges closer to a restructuring. The exit by long-time supporters of Evergrande founder Hui Ka Yan is another sign that the company has lost the confidence of investors as it struggles to make good on its $300 billion in liabilities.

Chan sold 131.4 million shares in Evergrande over two weeks ending on Sept. 10 to raise about $68 million, reducing the combined holdings for Chinese Estates and its CEO to about 7.2%, according to company filings. 

Wealthy investors like Lau and Chan who supported Hui’s sprawling empire are now paying a heavy price amid growing concern the group will struggle to repay its debts.

Hui had long been able to count on his poker pals to back Evergrande during times of trouble, whether it was by buying stakes in his company, loading up on its bonds or not calling in debts. He broadened that circle to raise funds for his property services business in December, as well as an electric-vehicle startup in January. 

The sharp reversal in Evergrande and its units means Hui’s friends are now facing potentially punishing losses. The developer’s shares have tumbled more than 80% this year even with a rebound Thursday, while Evergrande Property Services Group Ltd. is off 50%.

The outlook for Evergrande is deteriorating by the day, with the company and local government hiring advisers for what could be one of the country’s largest-ever debt restructuring. Protests against the company broke out out across China after Evergrande failed to pay retail investors of its high-yield products on time. 

Evergrande’s shares surged and its dollar bonds rallied early Thursday as investors bet the distressed developer would avoid a disorderly debt resolution after one of its units negotiated interest payments on yuan bonds.

The company’s Hong Kong-listed stock jumped as much as 32%, the most since 2009. Evergrande’s 8.25% dollar bond due 2022 climbed 4.4 cents on the dollar to 29.6 cents as of 9:58 a.m. Hong Kong time, according to Bloomberg-compiled prices.

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