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China's Evergrande to sell stakes in HengTen internet unit for US$418 million

HONG KONG :China's most indebted property developer Evergrande Group has agreed to sell stakes in its internet unit HengTen Networks Group Ltd worth a total of HKUS$3.25 billion (US$418.2 million), an exchange filing showed on Sunday.

China's Evergrande to sell stakes in HengTen internet unit for US$418 million

FILE PHOTO: An exterior view of China Evergrande Centre in Hong Kong, China March 26, 2018. Picture taken March 26, 2018. REUTERS/Bobby Yip/File Photo/File Photo

HONG KONG -China's most indebted property developer Evergrande Group has agreed to sell stakes in its internet unit HengTen Networks Group Ltd worth a total of HKUS$3.25 billion (US$418.2 million), an exchange filing showed on Sunday.

Shares of Evergrande declined more than 2per cent in early trading on Monday on continued worries over its financial health, while HengTen jumped more than 30per cent. Shares of HengTen resumed trading on Monday after a suspension on Thursday.

Worries over the developer's debt and the potential for systemic financial risk have intensified after Evergrande said in June its project companies had not paid some commercial paper on time, but it said it was arranging payment.

Fitch downgraded its credit rating on Wednesday, signalling its concern of a potential default.

To ease the pressure, Evergrande will sell a 7per cent stake at HKUS$3.20 per share to a unit of Tencent Holdings Ltd. for HKUS$2.07 billion and a 4per cent stake to an unidentified buyer for HKUS$1.18 billion. The filing did not give a timing for the sale.

Before the transaction, Evergrande held a 37.55per cent stake in the company, while Tencent held 16.9per cent. Evergrande’s stake will go down to 26.55per cent and Tencent’s holdings will increase to 23.9per cent after the sale, the filing showed.Evergrande has agreed to provide a 5-year loan of HKUS$2.07 billion to HengTen to support its business development, the company added in the filing.

HengTen’s shares are expected to resume trading on Aug. 2 after being halted on July 29, the filing showed.

(US$1 = 7.7720 Hong Kong dollars)

(US$1 = 7.7721 Hong Kong dollars)

(Reporting by Marius Zaharia; Additional reporting by Clare Jim; editing by Barbara Lewis and Sonali Paul)

Source: Reuters

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