Major Evergrande Backer Chinese Estates can sell its shares

(Bloomberg) — Chinese Estates Holdings Ltd. sold shares in China Evergrande Group and said it could exit all of its holdings, a major withdrawal from the backing of one of the embattled developer’s longtime backers.

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Chinese Estates sold 108.9 million Evergrande shares for HK$246.5 million ($31.7 million) from Aug. 30 to Sept. 21, according to a statement to the Hong Kong stock exchange Thursday. The Hong Kong real estate company may sell its remaining 751.1 million Evergrande shares, adding that it could incur a loss of approximately HK$9.5 billion if it sold all of its shares.

Chinese Estates’ moves are fueling the sale by Chief Executive Officer Chan Hoi Wan, wife of billionaire Joseph Lau, who has sold shares in the world’s most indebted developer as it moves closer to restructuring. The departure by longtime supporters of Evergrande founder Hui Ka Yan is another sign that the company has lost investor confidence as it struggles to make good on its $300 billion obligations.

Chan sold 131.4 million shares of Evergrande in two weeks ending Sept. 10 to raise approximately $68 million, reducing the combined holdings for Chinese Estates and its CEO to about 7.2%, according to company filings.

Wealthy investors like Lau and Chan who supported Hui’s sprawling empire are now paying a heavy price amid growing concerns that the group will struggle to repay its debts.

Hui had long been able to count on his poker buddies to support Evergrande in times of trouble, whether it was buying stakes in his company, reloading his bonds, or taking out debt. He expanded that circle to raise money for his real estate company in December and for electric vehicle startups in January.

The sharp turnaround in Evergrande and his units means that Hui’s friends now face potentially punishing losses. Shares of the developer have fallen more than 80% this year, even with a rebound on Thursday, as Evergrande Property Services Group Ltd. 50% has fallen.

The prospects for Evergrande are deteriorating by the day as the company and local government hire advisors for what could be one of the country’s largest debt restructurings ever. Protests erupted across China against the company after Evergrande failed to pay for its high-yield products on time.

Shares of Evergrande rose and dollar bonds rose early Thursday as investors bet the ailing developer would avoid a messy debt solution after one of its units negotiated interest payments on yuan bonds.

The company’s Hong Kong-listed shares rose a whopping 32%, the most since 2009. Evergrande’s 8.25% dollar bond maturing in 2022 climbed 4.4 cents on the dollar to 29.6 cents as of 9:58 a.m. Hong Kong time, according to Bloomberg compiled prices.

(Adds Chan’s inventory sales in fourth paragraph)

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