Evergrande’s Second-Biggest Shareholder Plans to Sell Entire Stake

Chinese Estates Holdings, the second-largest shareholder in beleaguered developer China Evergrande, announced on Thursday that it had sold a $32 million interest in the company and expects to withdraw completely.

"The directors are cautious and concerned about China Evergrande Group's recent developments, especially various disclosures made by China Evergrande Group on its liquidity," Chinese Estates wrote in a Hong Kong stock exchange filing.

Evergrande is failing to satisfy its financial obligations, with $305 billion in liabilities, and investors are concerned that the rot could spread to creditors, including Chinese and international banks.

Chinese Estates' stock rose 15.1 percent to HK$2.51 in early trading, marking the highest daily percentage gain since June 2020.

After its affiliate declared on Wednesday it had "settled" a coupon payment on an onshore bond, China Evergrande stock rose as much as 32 percent, the greatest daily percentage rise since its November 2009 IPO.

According to Refinitiv Eikon data, Chinese Estates owned around 6.50 percent of Evergrande's equity capital as of Sept. 10 and has required a sale of all or part of the remaining 5.66 percent Evergrande stake on the market or through block trades.

According to the company, the disposal mandate will be valid for 12 months from the date of the shareholders' meeting on Sept. 23 to approve the sale. Between Aug. 30 and Sept. 21, Chinese Estates sold 108.91 million shares, or 0.82 percent, of Evergrande's issued share capital for HK$246.5 million ($32 million).

If the entire stake is sold, the business expects to lose around HK$9,486.3 million ($1.22 billion) in the fiscal year ending in December 2021.

The proceeds from the sales will be utilized for general working capital and reinvestment when the opportunity arises, according to the company.

($1 = 7.7860 Hong Kong dollars)