China's indebted Evergrande sells stakes in internet unit for $566 million

HONG KONG (BLOOMBERG) – China Evergrande Group has agreed to sell stakes in its internet unit for a total of HK$3.25 billion (S$566 million) to ease funding pressure.

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

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

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 this 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.

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

Hengten’s shares are expected to resume trading on Aug 2, the filing showed.

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