Evergrande raises $1.5bn after selling bank stake

China’s Evergrande is to sell part of its stake in Shengjing Bank for $1.5bn, as the embattled firm looks to raise cash and paydown creditors.

The heavily-indebted property developer said it was selling a 19.93% stake in the bank to the state-owned Shenyang Shengjing Finance Investment Group.

Evergrande said: "The company’s liquidity issue has adversely affected Shengjing Bank in a material way.

"The introduction of the purchaser, being a state-owned enterprise, will help stabilise the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75% interest in Shengjing Bank retained by the company."

Shengjing is one of Evergrande’s main lenders and the money raised will be used to settle its liabilities.

Said Evergrande: "Shengjing Bank demands that all net proceeds from the disposal be applied to settle the relevant financial liabilities of the group due to Shengjing Bank."

Concerns over Evergrande’s future have unsettled markets worldwide in recent weeks.

The firm, which borrowed heavily to build its property portfolio and now has debts of around $300bn, owns around 1,300 projects in more than 280 Chinese cities. Other business interests range from ownership of football team Guangzhou FC to wealth management and food manufacturing.

On Monday, Citi cited the embattled group as it trimmed its 2022 growth forecasts for China to 4.9% from 5.5%.

The cash-strapped developer last week missed an interest payment of $83.5m on an overseas bond, although it did strike a deal with investors over another interest payment of $35.9m. However, it is now facing a further interest payment, of $47.5m, due on Wednesday.

Craig Botham, chief China economist at Pantheon Macroeconomics, said Evergrande had been further downgraded by Fitch, and now remained just one notch above ‘junk’ status following last week’s missed coupon payment.

He said: "A 30-day grace period must elapse before it is officially in default, but another repayment looms today and there can be little doubt about the state of the firm’s books.

"A piecemeal bailout continues, with government pressure on stat-own firms and state-backed banks to acquire Evergrande assets. We would note though that this is more about limiting social unrest by make sure homebuyers receive their homes than an effort to keep Evergrande alive."