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China debt crunch

Evergrande sells entire stake in streaming platform HengTen

World's most indebted developer raises $273m in latest bid to avoid default

The Shenzhen-based real estate company has been struggling to deal with over $300 billion in liabilities.   © Reuters

HONG KONG (Reuters) -- China Evergrande Group is selling its entire stake in streaming services firm HengTen Network Group for HK$2.13 billion ($273.5 million), as the cash-strapped developer boosts efforts to avoid a debilitating default on its debts.

Evergrande, the world's most indebted developer, said on Thursday it would book a loss of HK$8.5 billion from selling the 18% stake in HengTen, in which Chinese gaming and social media giant Tencent Holdings holds around a 20% 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 in liabilities, $19 billion of which are international market bonds.

A wholly owned unit of Evergrande entered into an agreement with Allied Resources Investment Holdings, owned by investor Li Shaoyu, to sell 1.66 billion HengTen shares at HK$1.28 per share, at a discount of 24% to its closing price on Wednesday.

The latest share disposal extends Evergrande's sell-down of its HangTen stake from 26.55% in the secondary market since early this month.

Shares of Evergrande dropped 5% in afternoon trade, while HengTen, which streams and produces film and television programs and has been described as China's Netflix by Chinese media, jumped 23%.

Evergrande's bonds due March 2022 rose 1.997 cents to 32.2 on the dollar, according to Duration Finance.

The developer said in the filing that 20% 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 totaling $82.5 million due on Nov. 6, can meet its obligations before the 30-day grace period expires on Dec 6.

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 on Thursday from placing 4.5% of enlarged shares, two sources with direct knowledge of the matter told Reuters.

The company sold 150 million new shares at HK$53.35 each, a 9.5% discount to the last traded price of HK$58.95 on Wednesday. Its shares were suspended from trading on Thursday, while those of parent Country Garden dropped 4.3%.

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 per share of its property management unit A-Living Smart City Services.

Shares of A-Living tumbled 8.3% to HK$21 on Thursday.

Agile said it has remitted funds to repay its $190 million senior notes due Thursday.

"The market has expected fundraising 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' cash flow.

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.

CIFI Holdings also raised $214.5 million via a rights issue earlier in November, while Shimao Services raised a total of HK$4.8 billion 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 destabilizing 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 totaling more than $255 million due on Dec. 28. 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.

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