Evergrande will divest about 20% of the issued share capital of the bank, at a price of CNY5.70 ($0.8) per share, for a total of CNY9.99bn ($1.5bn)


Guangzhou Evergrande Centre. (Credit: CRCHF/Wikipedia.)

Chinese property developer Evergrande has agreed to sell its stake worth CNY9.99bn $1.5bn in Shengjing Bank to Shenyang Shengjing Finance Investment Group to avoid defaulting on its debts.

The Chinese property firm is struggling to raise funds as it was besieged by a $300bn debt and, and faces bond interest payment deadlines.

Shenyang Shengjing Finance is a state-owned enterprise engaged in industrial investment, capital management and asset management businesses.

Evergrande has agreed to divest 1.75 billion shares, representing 19.93% of the issued share capital of the bank, at a price of CNY5.70 ($0.8) per share to the state-owned firm.

With the deal, the property company’s current 34.5% stake in Shengjing Bank will be reduced to 14.57%.

Also, Shenyang Shengjing’s stake will be increased to 20.79%, and become the bank’s largest shareholder, upon closing of the transaction.

Shengjing Bank demanded that the net proceeds from the transaction should be used to settle the financial liabilities of the company, due to the lender.

Evergrande has missed a bond interest payment last week and is unable to use the funds for another interest payment to offshore bondholders of $47.5m, which is due today.

Established in 1997, the bank has been operating as a joint-stock limited company, abiding by the People’s Republic of China (PRC) laws.

Its subsidiaries are engaged in providing corporate and personal deposits, loans and advances, settlement, treasury business and other banking services in China.

Evergrande chairman Hui Ka Yan, in a statement, said: “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 stabilise 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.”

Last week, The People’s Bank of China (PBOC) has injected CNY120bn ($18.6bn) into the country’s banking system, to keep the liquidity stable amid the ongoing Evergrande crisis.