Evergrande's second-biggest shareholder plans to sell entire stake

With US$305 billion in liabilities, Chinese developer Evergrande is struggling to meet its debt obligations.
With US$305 billion in liabilities, Chinese developer Evergrande is struggling to meet its debt obligations.PHOTO: REUTERS

HONG KONG (REUTERS) - Chinese Estates Holdings, the second-biggest shareholder of embattled developer Evergrande, said on Thursday (Sept 23) it has sold US$32 million (S$43.3 million) worth of its Evergrande stake and plans to exit the holding completely.

“The directors are cautious and concerned about the recent development of China Evergrande Group including certain disclosure made by China Evergrande Group on its liquidity,” Chinese Estates said in a filing to the Hong Kong stock exchange.

With US$305 billion in liabilities, Evergrande is struggling to meet its debt obligations and investors worry that the rot could spread to creditors including banks in China and abroad.

Shares of Chinese Estates jumped as much as 15.1 per cent in early trading to HK$2.51, notching the biggest daily percentage gain since June last year.

Evergrande stock soared as much as 32 per cent in the biggest daily percentage rise since listing in November 2009, after its unit said on Wednesday it had “resolved” a coupon payment on an onshore bond.

Chinese Estates, which owned about 6.5 per cent of Evergrande’s share capital as at Sept 10 according to Refinitiv Eikon data, said it has mandated a sale of all or part of the remaining 5.66 per cent Evergrande stake either on the market or through block trades.

The disposal mandate will be valid for 12 months from the date of a shareholders’ meeting on Thursday to approve the sale, it said.

Chinese Estates said it had already sold 108.91 million shares, or 0.82 per cent, of Evergrande’s issued share capital between Aug 30 and Tuesday for HK$246.5 million (S$43 million).

The company estimated that if the entire stake is sold, it will realise a loss of about HK$9.49 billion for the year ending in December.

Proceeds from the disposals will be used for general working capital and for reinvestment when opportunities arise, it added.