Evergrande sells stake in HengTen to ease debt

FILE PHOTO: The China Evergrande Centre building sign is seen in Hong Kong, China. August 25, 2021. REUTERS/Tyrone Siu/File Photo

HONG KONG: China Evergrande Group is selling its entire stake in streaming services firm HengTen Network Group to raise US$273.5mil (RM1.14bil), as the cash-strapped developer boosts efforts to avoid a debilitating default on its debts.

Evergrande, the world’s most indebted developer, said it would book a loss of HK$8.5bil (RM4.56bil) from selling the 18% stake in HengTen, in which Chinese gaming and social media giant Tencent Holdings holds around a 20% share.

The Shenzhen-based real estate company has been stumbling from deadline to deadline in recent weeks as it grapples with more than US$300bil (RM1.25 trillion) in liabilities, US$19bil (RM79.43bil) of which are international market bonds.

A wholly owned unit of Evergrande entered into an agreement with Allied Resources Investment Holdings Ltd, owned by investor Li Shao Yu, to sell 1.66 billion HengTen shares at HK$1.28 (68.69 sen) per share, at a discount of 24% to its closing price on Wednesday.

The latest share disposal extends Evergrande’s sell-down of its HangTen stake from 26.55% in the secondary market since early this month.

Shares of Evergrande dropped 2.5% in late morning trade, while HengTen, which streams and produces film and television programmes and has been described as China’s Netflix by Chinese media, jumped 22.5%.

Evergrande said that 20% of the deal consideration will be payable within five business days from the date of the agreement, while the remainder will be completed within two months, according to the Hong Kong stock exchange filing.

Investors are on tenterhooks as they wait to see if Evergrande, which failed to pay coupons totalling US$82.5mil (RM345mil) due on Nov 6, can meet its obligations before the 30-day grace period expires on Dec 6.

Other Chinese property developers are also stepping up financing efforts via share sales as liquidity in the offshore bond market dries up due to fears over any contagion from Evergrande’s troubles.

Country Garden Services Holdings, the property services unit of developer Country Gardens, is selling 150 million new shares.

This represents 4.5% of the enlarged capital, to raise US$1.03bil (RM4.30bil), according to a term sheet seen by Reuters.

The selling price is HK$53.35 (RM28.63) each.

This is a 9.5% discount to the last traded price of HK$58.95 (RM31.63) on Wednesday.

Country Garden Services said it will use the proceeds for future acquisition opportunities and new business development.

The company’s shares were suspended from trading yesterday, while those of parent Country Garden dropped 3.2%.

Smaller rival Agile Group also said yesterday that it had sold convertible bonds worth HK$2.4bil (RM1.28bil) based on the initial exchange price of HK$27.48 (RM14.74) per share of its property management unit A-Living Smart City Services.

When fully converted, the bonds will represent 6.2% of A-Living’s issued share capital.

Shares of A-Living tumbled 8.3% to HK$21 (RM11.27) yesterday.

Agile said the fund raising was beneficial to the company, considering the recent market conditions. The company said it had remitted funds to repay its US$190mil (RM794.25mil) senior notes due yesterday.

Early this week, Sunac China, among the top four developers in the country, said it had raised a total of US$949.70mil (RM3.97bil) by issuing new shares and selling a stake in Sunac Services.

On top of the debt market pressures, Chinese property developers are also facing stiff challenges from an array of unprecedented policy tightening steps by Beijing to curb speculative buying.

China Vanke told its staff they needed to cut unnecessary spending akin to being in “war time”, according to a source. ― Reuters

Source: The Star


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