China Evergrande "Selling Bank Shares Held by Subsidiaries" ... Secures 1.8 Trillion Won in Funds (Comprehensive)

20% Stake in Shengjing Bank Sold to State-Owned Enterprise
Signal of Evergrande Group Restructuring... May Be Split into 3-4 Companies
9 Trillion Won Bond Maturities Due by Next Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] Evergrande (恒大·Ebeogeulande), China's second-largest real estate developer facing a debt default crisis, announced on the 29th that it will sell its 19.93% stake in Shengjing Bank, which is held by its subsidiary. If this sale process is completed, Evergrande is expected to secure approximately 1.8 trillion KRW in funds.

This sale must go through approval procedures from the China Banking and Insurance Regulatory Commission and the State-owned Assets Supervision and Administration Commission. Evergrande Group stated regarding this stake sale, "It is expected that a state-owned enterprise will participate as the buyer of the shares," and "the operations of Shengjing Bank will stabilize."

This move is interpreted as Evergrande Group, which is on the brink of default, selling non-core assets to raise liquidity. At the same time, there is an interpretation that a government-level restructuring of Evergrande Group has begun in China.

Until now, the market has predicted that Evergrande Group will eventually be split into 3 to 4 companies and nationalized.

Lisa Zhou, an analyst at Bloomberg News, said, "If Evergrande sells some business sectors to state-owned enterprises, it seems likely to resolve the immediate liquidity crisis."

Currently, Evergrande Group's debt amounts to $302 billion (approximately 358 trillion KRW). Evergrande is facing a default crisis as it has failed to pay bond interest on time. The default of Evergrande, China's second-largest real estate company, could pose a potential threat not only to China but also to the global financial market.

According to Bloomberg's tally, Evergrande Group is expected to face bond maturities of $7.4 billion (approximately 8.8 trillion KRW) by next year.

On this day, Evergrande must additionally pay $45 million (approximately 55.9 billion KRW) in dollar-denominated bond interest.

Bloomberg News reported, "This bond maturity is expected to be another major test for Evergrande Group," adding, "Evergrande is already failing to pay funds on time to banks and regional investment product investors."

Previously, on the 23rd, Evergrande was supposed to pay dollar bond interest (approximately 99.3 billion KRW) and yuan bond interest (approximately 42.5 billion KRW). However, Evergrande reportedly paid only the yuan bond interest and failed to pay the dollar bond interest.

Bloomberg News reported that Jumbo Fortune, a company headquartered in Hong Kong, has bonds worth $260 million (approximately 300 billion KRW) maturing on October 3rd. Citing sources, the media reported that some investors holding bonds issued by this company are forming a committee to recover the bonds, claiming that Evergrande Group and its affiliates guaranteed these bonds.

Following the announcement of Evergrande Group's stake sale in Shengjing Bank, Evergrande's stock price started with a 3.4% rise on the Hong Kong Stock Exchange.

Meanwhile, on the first day that shares of DRC Bank were traded on the Hong Kong Stock Exchange, the stock plunged 18%. Earlier, through its IPO on the Hong Kong Stock Exchange, DRC Bank raised HKD 9.1 billion (approximately 1.4 trillion KRW), marking the largest IPO among banks listed on the Hong Kong Stock Exchange in the past two years.

There is analysis that concerns over the Evergrande Group crisis spreading to the Chinese financial market influenced the plunge in DRC Bank's stock price.

Bloomberg News reported that there are concerns that DRC Bank, the fifth-largest local bank in China, could be exposed to the Evergrande Group crisis.