China Evergrande Group (3333.HK) is selling its entire stake in streaming services firm HengTen Network Group (0136.HK) to raise HK$2.13 billion ($273.5 million), as the cash-strapped developer boosts efforts to avoid a debilitating default on its debts.
Evergrande, the world’s most indebted developer, said on Thursday it would book a loss of HK$8.5 billion from selling the 18% stake in HengTen, in which Chinese gaming and social media giant Tencent Holdings (0700.HK) holds around a 20% share.
The Shenzhen-based real estate company has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds.
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, 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.
Shares of Evergrande dropped 2.5% in late morning trade, while HengTen, which streams and produces film and television programmes and has been described as China’s Netflix by Chinese media, jumped 22.5%.
Evergrande said that 20% of the deal consideration will be payable within five business days from the date of the agreement, while the remainder will be completed within two months, according to the Hong Kong stock exchange filing.
Investors are on tenterhooks as they wait to see if Evergrande, which failed to pay coupons totalling $82.5 million due on Nov. 6, can meet its obligations before the 30-day grace period expires on Dec 6.
Other Chinese property developers are also stepping up financing efforts via share sales as liquidity in the offshore bond market dries up due to fears over any contagion from Evergrande’s troubles.
Country Garden Services Holdings (6098.HK), the property services unit of developer Country Gardens (2007.HK), is selling 150 million new shares, representing 4.5% of the enlarged capital, to raise $1.03 billion, according to a term sheet seen by Reuters on Thursday.
The selling price is HK$53.35 ($6.85) each, a 9.5% discount to the last traded price of HK$58.95 on Wednesday. Country Garden Services said it will use the proceeds for future acquisition opportunities and new business development.
The company’s shares were suspended from trading on Thursday, while those of parent Country Garden dropped 3.2%.
Smaller rival Agile Group also said on Thursday it sold convertible bonds worth HK$2.4 billion based on the initial exchange price of HK$27.48 per share of its property management unit A-Living Smart City Services (3319.HK).
When fully converted, the bonds will represent 6.2% of A-Living’s issued share capital. Shares of A-Living tumbled 8.3% to HK$21 on Thursday.
Agile said the fund raising is beneficial to the company considering the recent market conditions. The company said it has remitted funds to repay its $190 million senior notes due Thursday.
Early this week, Sunac China (1918.HK), among the top four developers in the country, said it raised a total of $949.70 million by issuing new shares and selling a stake in Sunac Services (1516.HK).
On top of the debt market pressures, Chinese property developers are also facing stiff challenges from an array of unprecedented policy tightening steps by Beijing to curb speculative buying.
China Vanke (000002.SZ) told its staff on Tuesday they need to raise their “crisis awareness” and cut unnecessary spending akin to being in “wartime”, according to a person with direct knowledge.
Last week, Evergrande once again averted a destabilising default with a last-minute bond payment but the reprieve did little to alleviate strains in the country’s wider property sector from a liquidity crunch.
Evergrande has new coupon payments totalling more than $255 million due on Dec. 28. It has come under pressure from its other creditors at home and a stifling funding squeeze has cast a shadow over hundreds of its residential projects.
Chinese authorities have urged Evergrande Chairman Hui Ka Yan, 63, to use some of his personal wealth to help pay bondholders, two people with knowledge of the matter told Reuters last month.
Its founder is now freeing up funds from luxury assets including art, calligraphy and three high-end homes, according to filings and a person with knowledge of the matter.
Construction company Shanghai Trendzone Holdings (603030.SS) said on Wednesday it is suing Evergrande and its units for missing payments worth $38.3 million.
($1 = 7.7889 Hong Kong dollars)