Chinese Estates Holding, the second-biggest shareholder of embattled giant Evergrande, has announced its plans to exit the company.
In a Hong Kong stock exchange filing, Chinese Estates Holding confirmed it sold 0.83 per cent of Evergrande’s issued share capital between 30 August and 21 September for $43.8 million and now intends to dump the remaining 5.66 per cent.
Chinese Estates Holding said it’s currently seeking approval of the relevant shareholders to exit Evergrande entirely “at appropriate occasions”.
“The group will, depending on the prevailing market conditions, dispose of up to 751,091,000 mandate shares on-market or through block trade(s) in one or series of transactions from time to time during the mandate period,” it confirmed.
The reasons underpinning its decision to exit include concerns about the recent developments and certain disclosures made by Evergrande on its liquidity.
Just days earlier, China’s Evergrande announced that it faces serious challenges and uncertainties in improving its liquidity and therefore cannot guarantee that it will be able to meet its financial obligations under the relevant financing documents and other contracts.
“If the group is unable to meet its guarantee obligation or to repay any debt when due or agree with the relevant creditors on extensions of such debts or alternative agreements, it may lead to cross-default under the group’s existing financing arrangements and relevant creditors demanding acceleration of repayment. This would have a material adverse effect on the group’s business, prospects, financial condition and results of operations,” Evergrande said on 14 September.
Chinese Estate Holdings confirmed that the sale could put a dent of up to $1.7 billion in its financial books for the year ending in December 2021, given Evergrande’s steep share price decline. However, this, it feels, is a necessary risk.
Evergrande, which boasts 1,300 building projects across China, is saddled with debt exceeding $400 billion.
On Wednesday, its share price rebounded slightly, following an 80 per cent loss since the start of this year, after its main unit Hengda Real Estate Group Co Ltd confirmed it would service an interest payment on the Shenzhen-traded 5.8 per cent September 2025 bond on 23 September.
Hengda’s Shenzhen exchange filing did not mention the offshore bond also due Thursday. The US$83.5 million interest payday due on its March 2022 bond is, however, said to have a 30-day grace period.