China's Evergrande Reduces Debt With $9 Billion Stake Sale

Updated on
  • Suning among those to buy stake in Evergrande’s property unit
  • Evergrande has sold total $19.6 billion of shares in that unit
Photographer: Qilai Shen/Bloomberg

China Evergrande Group, once the country’s most-indebted developer, raised 60 billion yuan ($9 billion) from selling a stake in a property unit to further reduce its leverage.

The sale will cut Evergrande’s stake in Hengda Real Estate to 63.5 percent from 73.9 percent, the company said in a filing to Hong Kong’s stock exchange on Monday. This is the third time Evergrande has reduced holdings in the unit, having previously sold 70 billion yuan of its shares.

Evergrande shares have risen more than 480 percent this year, partly thanks to its efforts to reduce debt. Other contributing factors include a planned backdoor listing of Hengda’s assets in China and a series of buybacks the company undertook to fight off short-sellers.

The six investors in the latest round of fundraising includes Shandong Highway Investment and Suning Electrical Appliances. Evergrande also raised its net profit forecasts for Hengda Real Estate for the three financial years through 2020.

The latest fundraising implies a valuation for the unit of 425 billion yuan, based on calculations by Bloomberg. That’s higher than the 268 billion yuan indicated by an earlier sale to strategic investors in June.

In Monday’s filing, a change in the wording for a previously articulated investor guarantee indicated that Evergrande has given itself a longer timeframe to complete Hengda’s backdoor listing.

Previous statements had said that Evergrande or its Chairman Hui Ka Yan are obliged to fully repurchase any investors’ stakes in Hengda if the listing isn’t completed by January 2020. That date was changed to January 2021 in the latest filing.

— With assistance by Emma Dong

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