China’s struggling Huarong gets $ 6.6 billion lifeline

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Hong Kong (AFP) – Cash-strapped debt collector Huarong Asset Management has announced plans to raise $ 6.6 billion by selling shares and ceding more assets as the heavily indebted Chinese state-owned company tries to stay afloat .

The bailout, filed Wednesday night on the Hong Kong Stock Exchange, will see the company sell some 41.2 billion shares to investors led by Citic Group at 1.02 yuan apiece.

The news came as real estate giant Evergrande, whose efforts to deal with inflated debt have fueled fears about China’s real estate industry, announced it was raising $ 273 million by selling its remaining stake in movie production and streaming company HengTen Networks.

Hong Kong-based Allied Resources Investment Holdings bought HengTen for HK $ 1.28 per share, a 24% discount from its close on Wednesday, according to a document filed with the Hong Kong Stock Exchange.

Evergrande and Huarong have both become disturbing examples of Chinese companies that have racked up massive debt, as mainland authorities desperately seek to stem any contagion from their potential collapse.

Huarong, one of four debt collectors created by China’s finance ministry, scared Asian markets earlier this year by delaying its annual report in March.

Investors have started to worry about whether he could cover his $ 242 billion in liabilities – including some $ 20 billion in offshore bonds – although he has so far met all of his repayment obligations.

Five months later, Huarong finally released its results, revealing a record loss of $ 15.9 billion for 2020 along with the outline of a bailout.

The stock sale announced on Wednesday night is part of the bailout and will see the finance ministry’s stake in Huarong fall to 28 percent from 57 percent.

But it’s still lower than the 50 billion yuan ($ 7.8 billion) that Huarong said he hoped to raise when he first announced the bailout in August.

The alarm bells started ringing about private real estate giant Evergrande earlier this summer when it struggled to make a series of domestic and foreign bond repayments.

The liquidity shortage at one of China’s largest real estate developers – which has some $ 300 billion in liabilities – has rocked investor sentiment and rocked the country’s key real estate market, adding to fears of wider contagion .

Evergrande has since rushed to sell assets to raise funds.

Last week, he met a deadline to pay late interest on three US dollar bonds before their grace period ended.

Meanwhile, Hong Kong media reported that the company’s chairman, Hui Ka Yan, was offloading some of his personal fortune to raise funds, including a luxury property in the upscale Peak district, the financial center.

Bloomberg News also reported Thursday that Chinese property management firm Country Garden Services Holdings plans to raise $ 1.03 billion through a share sale, an indication of how the real estate industry is rushing to fill. a lack of current liquidity.

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