China's Evergrande Group is selling its entire stake in streaming services firm HengTen Network Group for HK$2.13 billion (€241 million), as the cash-strapped developer boosts efforts to avoid a debilitating default on its debts.
Evergrande, the world's most indebted developer, said it would book a loss of HK$8.5 billion (€963 million) from selling the 18 per cent stake in HengTen, in which Chinese gaming and social media giant Tencent Holdings holds around a 20 per cent share.
The Shenzhen-based real estate company has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion (€264.7 billion) in liabilities, $19 billion (€16.7 billion) of which are international market bonds.
A wholly owned unit of Evergrande entered into an agreement with Allied Resources Investment Holdings Ltd, owned by investor Li Shao Yu, to sell 1.66 billion HengTen shares at HK$1.28 per share, at a discount of 24 per cent to its closing price on Wednesday.
The latest share disposal extends Evergrande's sell-down of its HangTen stake from 26.55 per cent in the secondary market since early this month.
Shares of Evergrande dropped 5 per cent in afternoon trade, while HengTen, which streams and produces film and television programmes and has been described as China's Netflix by Chinese media, jumped 23 per cent.
The developer said in the filing that 20 per cent of the deal consideration will be payable within five business days from the date of the agreement, while the remainder will be completed within two months.
Investors are on tenterhooks as they wait to see if Evergrande, which failed to pay coupons totalling $82.5 million (€72.8 million) due on November 6th, can meet its obligations before the 30-day grace period expires on December 6th.
Other Chinese property developers are also stepping up financing efforts via share sales as liquidity in the offshore bond market dries up due to fears over any contagion from Evergrande's troubles.
Country Garden Services Holdings, the property services unit of top developer Country Gardens, raised $1 billion (€882.1 million) on Thursday from placing 4.5 per cent of enlarged shares, two sources with direct knowledge of the matter told Reuters.
The company sold 150 million new shares at HK$53.35 (€6.04) each, a 9.5 per cent discount to the last traded price of HK$58.95 (€6.67) on Wednesday. Its shares were suspended from trading on Thursday, while those of parent Country Garden dropped 4.3 per cent.
Smaller rival Agile Group also said on Thursday it sold convertible bonds worth HK$2.4 billion based on the initial exchange price of HK$27.48 (€3.11) per share of its property management unit A-Living Smart City Services. Shares of A-Living tumbled 8.3 per cent to HK$21 (€2.37) on Thursday.
Agile said it has remitted funds to repay its $190 million senior notes due Thursday.
Liquidity squeeze
"The market has expected fund-raising activities in the sector because if mainland China does not loosen liquidity, it'll be difficult for the property firms to get large loans from financial institutions," said Castor Pang, head of research of Core Pacific in Hong Kong, adding that slowing home sales also hurt developers' cashflow.
The new issuance followed a share sale and a stake disposal in its property management unit by Sunac China, among the top four developers in the country, early this week, raising a total of $949.70 million (€837.8 million).
CIFI Holdings also raised $214.5 million (€189.2 million) via a rights issue earlier in November, while Shimao Services raised a total of HK$4.8 billion (€543.7 million) via a new share placement as well as convertible bonds.
On top of the debt market pressures, Chinese property developers are also facing stiff challenges from an array of unprecedented policy tightening steps by Beijing to curb speculative buying.
China Vanke told its staff on Tuesday they need to raise their "crisis awareness" and cut unnecessary spending akin to being in "wartime", according to a person with direct knowledge.
Last week, Evergrande once again averted a destabilising default with a last-minute bond payment, but the reprieve did little to alleviate strains in the country's wider property sector from a liquidity crunch.
Evergrande has new coupon payments totalling more than $255 million (€224.9 million) due on December 28th. It has come under pressure from its other creditors at home and a stifling funding squeeze has cast a shadow over hundreds of its residential projects.
Chinese authorities have urged Evergrande Chairman Hui Ka Yan (63) to use some of his personal wealth to help pay bondholders, two people with knowledge of the matter told Reuters last month.
Its founder is now freeing up funds from luxury assets including art, calligraphy and three high-end homes, according to filings and a person with knowledge of the matter.
