China's Evergrande to Sell $1.5 Billion in Shengjing Bank Shares Amid Liquidity Issues
MOSCOW (Sputnik) - China's second largest property developer, Evergrande Group, will sell its shares in the Shengjing Bank for a total of 9.9 billion yuan (around $ 1.5 billion), the company said on Wednesday in a statement on the Hong Kong Stock Exchange.
The company will sell 1.75 billion non-publicly traded domestic shares to the state-owned Shengjing Bank for 5.7 yuan each. The deal comes as Evergrande is struggling to pay off its $47.5 million bond interest payment with a deadline on Wednesday.
"The Company's liquidity issue has adversely affected Shengjing Bank in a material way. The introduction of the Purchaser, being a state-owned enterprise, will help stabilize the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75 interest in Shengjing Bank retained by the Company," the company's chairman, Hui Ka Yan, said in the statement.
Following the announcement of the sale, Evergrande's shares rose by 10%, trading data shows. Upon the closing of trading on Tuesday, the company's shares were worth 2.670 Hong Kong dollars (around $0.34) and then sharply rose to 3.08 Hong Kong dollars.
The company is on the brink of default after years of growth and active borrowing. Declining sales, a high-risk business model, and Beijing's actions to curb the boom in the Chinese housing market brought the company into crisis. At the end of June, Evergrande owed $304 billion. Since the beginning of this year, Evergrande's shares, which are traded in Hong Kong, decreased by 82%.
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