China Evergrande Group is selling all of its stocks in HengTen Network Group, it’s streaming services firm known as the “Chinese Netflix.”
The aim is to raise HK$2.13 billion (US$273.5 million) as an effort of the debt-laden behemoth to avoid default, Reuters reported on Nov. 18.
By selling its 18% stake in HengTen, where Chinese gaming and social media giant Tencent Holdings holds around a 20% share, Evergrande would book a loss of HK$8.5 billion (about US$ 1 billion), said the world’s most indebted developer on Thursday.
Rapid-fire deadlines have characterized Evergrande in recent weeks, and the Shenzhen-based real estate company failed to pay coupons totaling $82.5 million due on Nov. 6.
Investors are on tenterhooks as they wait to see if Evergrande can meet its obligations before the 30-day grace period expires on Dec. 6. The real estate giant is struggling with more than $300 billion in liabilities, $19 billion of which are international market bonds.
Evergrande also has new coupon payments totaling over $255 million due on Dec. 28. It has come under pressure from its other domestic creditors, and an oppressive funding squeeze has cast a shadow over hundreds of its residential projects.
According to Reuters, 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$1.28 per share (US$ 0.16), 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.
Evergrande shares dropped 2.5% in late morning trade, while HengTen, so-called China’s Netflix, jumped 22.5%, Reuters added.
Evergrande said that 20% of the deal consideration would be payable within five business days from the date of the agreement, while the remainder will be finished within two months, according to the Hong Kong stock exchange filing.
Other Chinese property developers such as Country Garden Services Holdings, Agile Group, Sunac China are also accelerating financing efforts via share sales as liquidity in the offshore bond market dries up due to fears of any contagion from Evergrande’s crisis.
On top of the debt market pressures, an array of unprecedented policy tightening steps by Beijing to curb speculative buying also creates stiff challenges to Chinese property developers.
On Tuesday, China Vanke told its staff they need to raise their “crisis awareness” and cut unnecessary expenditure as in “war time,” according to a person with direct knowledge, Reuters reported.