- Evergrande sells an 18% stake in HengTen for $ 273.5 million
- An Evergrande standard is still most likely -S&P
- Country Garden Services raises $ 1 billion through stock placement
- Agile issues HK $ 2.4 billion convertible bonds
- Vanke encourages employees to cut expenses, create “wartime atmosphere”
HONG KONG, NOVEMBER 18 (Reuters) – China Evergrande Group (3333.HP) sells its entire stake in the power services company HengTen Network Group (0136.HK) for HKD 2.13 billion (USD 273.5 million), while the cash developer struggling to avoid debilitating debt default.
However, S&P Global Ratings said in a report on Thursday that a default is still “highly likely” for the world’s most indebted developer despite recent payments of bond coupons because it has a major test in March and April next year, facing a total of 3, $ 5 billion maturity in dollar bonds. read more
“We still believe that an Evergrande default is highly probable,” it said.
“The company has lost the capacity to sell new homes, which means that the main business model has been discontinued in practice. This makes full repayment of the debt unlikely,” it says.
The Shenzhen-based real estate company has stumbled from deadline to deadline in recent weeks as it struggles with more than $ 300 billion in debt, of which $ 19 billion is international market bonds.
Evergrande said on Thursday that they would post a loss of HK $ 8.5 billion by selling an 18% stake in HengTen, in which the Chinese gaming and social media giant Tencent Holdings (0700.HK) has around a 20% stake.
Its wholly owned entity has 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, a 24% discount to the closing price on Wednesday.
The latest share sale expands Evergrande’s sale of its HangTen stake from 26.55% in the secondary market since earlier this month.
Shares in Evergrande closed down 5.7%, while HengTen, which streams and produces film and TV shows and has been described as China’s Netflix by Chinese media, rose 24.9%.
Evergrande’s bonds maturing in March 2022 rose 1,997 cents to 32.2 dollars, according to Duration Finance.
The developer said in the submission that 20% of the contract fee will be paid within five working days from the date of the contract, while the rest will be completed within two months.
Evergrande failed to pay coupons totaling $ 82.5 million due Nov. 6. Investors are crossing the line waiting to see if they can meet their obligations before the 30-day deadline expires on 6 December.
Other Chinese real estate developers are also stepping up funding efforts through stock sales as liquidity in the offshore bond market dries up due to fears of contagion from Evergrande’s problems. Real estate sales and new construction are declining.
Country Garden Services Holdings (6098.HK), the real estate service unit of top developer Country Gardens (2007.HK), raised $ 1 billion on Thursday from placing 4.5% of enlarged shares, two sources with direct knowledge of the case told Reuters.
The company sold 150 million new shares at HK $ 53.35 each, a 9.5% discount to the latest trading price of HK $ 58.95 on Wednesday. The shares were suspended from trading on Thursday, while the shares of mother Country Garden fell 5.1%.
Minor rival Agile Group (3383.HK) also said on Thursday that they sold convertible bonds worth HK $ 2.4 billion based on the original exchange price of HK $ 27.48 per share by the property management unit A-Living Smart City Services (3319.HK).
Shares of A-Living fell 12.8% to HK $ 21 on Thursday.
Agile said it has transferred funds to repay its $ 190 million senior bills due Thursday.
“The market has expected fundraising activities in the sector because if mainland China does not release liquidity, it will be difficult for real estate companies to get large loans from financial institutions,” said Castor Pang, research manager for Core Pacific in Hong Kong, adding that the decline in home sales also damaged the developers’ cash flow.
The new issue followed a share sale and a stake in the property management unit (1516.HP) of Sunac China (1918.HK), among the four best developers in the country, early this week, and raised a total of 949.70 million dollars.
CIFI Holdings (0884.HK) also raised $ 214.5 million through a rights issue earlier in November, while Shimao Services (0873.HK) raised $ 4.8 billion via a new equity placement and convertible bonds.
On top of the pressure on the debt market, Chinese real estate developers are also facing tough challenges from a number of unique policy tightenings from Beijing to curb speculative purchases.
China Vanke (000002.SZ) told its employees on Tuesday that they must increase their “crisis awareness” and cut unnecessary expenses such as being in “wartime”, according to a person with direct knowledge.
Last week, Evergrande once again averted a destabilizing default with a last-minute bond payment, but the postponement did little to ease the strain on the country’s broader real estate sector from a liquidity crisis. read more
Evergrande has new coupon payments totaling more than $ 255 million due on December 28. It has come under pressure from its other creditors at home, and a stifling funding squeeze has cast a shadow over hundreds of housing projects.
Chinese authorities have urged Evergrande chairman Hui Ka Yan, 63, to use some of his personal fortune to help pay bondholders, two people with knowledge of the case told Reuters last month. read more
The founder is now releasing funds from luxury assets, including art, calligraphy and three exclusive homes, according to registrations and a person with knowledge of the case.
($ 1 = 7.7889 Hong Kong dollars)
Further reporting by Joy Leung, Anne Marie Roantree and Scott Murdoch in Hong Kong, Shuyan Wang in Beijing and Marc Jones in London; Edited by Jacqueline Wong, Shri Navaratnam and Kim Coghill
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