Evergrande Sells Stakes in Internet Unit for $418 Million

Julia Fioretti, Bloomberg News

The China Evergrande Centre in the Wan Chai area of Hong Kong, China, on Friday, July 23, 2021. HSBC Holdings Plc and Bank of China Ltd.’s Hong Kong unit are reconsidering their decisions to halt mortgages for China Evergrande Group's unfinished residential properties in Hong Kong, after the city’s de facto central bank questioned the moves, according to people familiar with the matter. Photographer: Lam Yik/Bloomberg , Bloomberg

(Bloomberg) -- China Evergrande Group has agreed to sell stakes in its internet unit for a total of HK$3.25 billion ($418 million) to ease funding pressure.

The developer will sell 7% of Hong Kong-listed HengTen Networks Group Ltd. at HK$3.20 apiece to a unit of Tencent Holdings Ltd. for HK$2.07 billion, according to an exchange filing on Sunday. Evergrande also agreed to sell a 4% stake to an unidentified buyer for HK$1.18 billion.

Evergrande has resorted to offloading assets and spinoffs, as it tries to reassure investors about its financial heath and meet China’s so-called “Three Red Lines” requirements that curb developer debt ratios. So far it’s struggled with its stocks and bonds sinking last month. The world’s most indebted developer was downgraded by S&P Global Ratings and Fitch Ratings in recent days due to its weakening access to funds and liquidity position.

Prior to the transaction, the developer held a 37.55% stake in the company, while Tencent held 16.9%, according to disclosure of interests to the exchange. Evergrande’s stake will go down to 26.55% and Tencent’s holdings will increase to 23.9% after the sale, the filing showed.

HengTen climbed 22% in Hong Kong on Wednesday, halting three days of declines. The stock was later suspended. Evergrande dropped 28% last week to close at HK$5.26 on Friday.

HengTen’s shares are expected to resume trading on Aug. 2, the filing showed. Evergrande has agreed to provide a 5-year loan of HK$2.07 billion to HengTen to support its business development, the company added in the filing.

(Updates with more details from statement in final paragraph)