Mainland Court Sells Evergrande Stake in Shengjing Bank for $1.1B

Defaulting developer China Evergrande had its remaining 14 percent stake in Shengjing Bank auctioned off on Wednesday, with a consortium of seven mainland firms picking up the equity in the Shenyang lender with a winning bid of RMB 7.3 billion ($1.1 billion).

Through a sale arranged by a local court, the world’s most indebted builder unloaded its entire interest in the commercial bank to a buyer group consisting of three state-controlled enterprises and four private sector companies, according to the auction page on the Taobao platform. The consortium was the only bidder to enter the contest.

In July, Evergrande told the Hong Kong stock exchange that its Evergrande Group (Nanchang) Co Ltd unit had received an arbitration ruling requiring it to pay RMB 7.3 billion as compensation for loans of an equivalent amount that it had failed to repay to an unnamed creditor, which was the counterparty in the arbitration case.

The loan had been guaranteed by the shares held by Evergrande in Hong Kong-listed Shengjing Bank, with the creditor now entitled to receive the RMB 7.3 billion in proceeds from the sale of Evergrande’s stock in the mainland financial institution.

Cashing Out

In September of last year, one week after missing its first offshore bond payment, Evergrande announced that it was selling a RMB 9.9 billion stake in Shengjing Bank, which is headquartered in the city of Shenyang in Liaoning province, to a unit of the local government in order to raise money to meet its financial obligations.

Before that sale, Evergrande held a roughly 35 percent interest in the financial institution.

Shenzhen-based Evergrande had begun buying up equity in Shengjing Bank in 2016 with the purchase of a 5.59 percent stake for HK$3.89 billion ($500 million), at a time when the developer was already racking up debt amid an acquisition spree.

By the end of 2021, ratings firms were tagging Evergrande as a defaulter after the company missed interest payments on some of its $19.2 billion in offshore debt.

Restructuring Delay

Despite having promised creditors in January of this year that it would roll out a comprehensive restructuring package for its $300 billion in liabilities by the end of July, Evergrande failed to present a plan that month, promising instead that it would attempt to present a detailed plan within this year.

The group controlled by billionaire Xu Jiayin laid out a set of principles for repayment, including using equity in its property services and electric vehicle units to repay bondholders.

Evergrande’s plight took on fresh urgency in June when the developer was hit with a winding-up petition filed by an investor in the group’s Fangchebao online platform. A company called Top Shine Global Limited asked the high court of Hong Kong to order the liquidation of Evergrande for not honouring a repurchase agreement signed more than a year earlier.

A judge at the court decided this week to adjourn proceedings until 7 November to give Evergrande time to formulate its restructuring plan.