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State-owned enterprises move in on Evergrande

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The effective nationalization of China Evergrande has begun with state-owned enterprises delivering on an edict from the Chinese Government to buy the debt-laden property developer’s assets.

This biggest deal to date involves Shenyang Shengjing Finance, who’s purchasing Evergrande’s 19.93 percent stake in the Shengjing Bank for close to $1.6 billion.

The deal, however, won’t ease the nerves of offshore bondholders.

Conditions stipulate that all proceeds be used to settle liabilities owed by Evergrande to the Shengjing Bank.

nationalization of China Evergrande
Stipulations on Evergrande’s Shengjing Bank transaction. (Source: HKEX)

Meanwhile, a number of other state-owned enterprises have been evaluating Evergrande’s property assets.

The Guangzhou City Construction Investment Group is one of those – reportedly on the cusp of acquiring Evergrande’s massive Guangzhou FC Soccer stadium and surrounding residential projects in a deal that would net Evergrande close to $2 billion.

China Vanke, China Jinmao Holdings, and China Resources Land are among other state-backed property giants that have been earmarked by the Government to buy up more Evergrande assets.

Earlier this month, Asia Markets revealed that China would begin asking state-owned enterprises to underpin the restructuring of Evergrande.

An executive with one China-backed enterprises telling this publication the CCP is focussed on “stemming any widespread economic flow-on effects that insolvency would cause on the China economy.”

Evergrande missed a $83.5 million interest payment for a USD bond last week and today has another $47.5 million interest payment due on the EVERRE 9.5% March 2024 USD bond.

On top of this, the company has a further $180 million in bond interest deadlines throughout the next month.

Evergrande’s balance sheet at the end of the first half of 2021 showed total liabilities of over $300 billion.

Additionally, Goldman Sachs has said it believes Evergrande has potentially $156 billion in off-balance sheet debt and contingent liabilities.

Read more: The Chinese property developer more geared than Evergrande

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