Evergrande raised Rmb10bn ($ 1.5bn) by selling a portion of the bank to a government agency, while China’s heavily indebted builders are struggling to survive in the event of a debt crisis.
The company said on Wednesday it had sold 20% cents to Shengjing Bank, located north of Shenyang city, to Shenyang Shengjing Finance Investment Group, which has government officials.
Evergrande retains a 15% stake in Shengjing Bank, which “requires” that all proceeds from the sale be used to address the group’s reimbursement, according to the law.
The sale price is minimal with all Evergrande loans exceeding $ 300bn. The company with the largest debt in the world, the company has a huge financial crisis after all lost interest of $ 83.5m on a dollar-denominated religious debt last week.
The company’s crisis has raised global concerns for China’s regional health sector, a long-term economic driver.
Evergrande, who last month warned of the dangers of fraud, did not announce anything about the payment. Paying special interest on another dollar loan is due today.
Evergrande said in a statement Wednesday that its financial crisis has “disrupted” the bank and added that the buyer, “being a state-owned company, has helped stabilize”.
Involvement of a government agency in this process will increase the expectation of participation in potential outreach repairing large debts in Chinese history.
The future of Evergrande poses a political challenge to local and central governments, with about 800 jobs in hundreds of cities while many citizens have already paid for unfinished housing.
Government officials have been has already entered in the Evergrande operations sector to be able to manage sales revenue. In the southern city of Guangzhou, the local government department said last week that payments made to Evergrande should be deposited in a state account so that “the interest of repatriates is protected”. A housing office in the nearby city of Zhuhai requested that the sale amount be deposited into a state account.
Chinese developers often sell their home to their buyers before they are finished, allowing the money to be sold to buy new ones that provide the necessary revenue to the home government. The sale of new homes and properties in China has plummeted in recent weeks, indicating that the government’s efforts to lease loans and developers are gaining momentum in the sector.
Paying interest last week due to tight debt next year was the last time the company is one of the largest credit card companies in Asia. The company owns $ 20bn worth of specialized dollars.
Offshore brokers hired law firm Kirkland & Ellis and Moelis, a stockbroker, to advise in advance of the restructuring.
Evergrande stockbrokers this month went down to the company’s headquarters in Shenzhen to claim the money.
The company’s shares, which have undergone a major overhaul, rose by 10% following the announcement. Mature bonds next year, when the money ran out, were selling at 26 cents a dollar this week.