China Evergrande Group has been making headlines around the world for all the wrong reasons, with investors watching with bated breath to see how the Chinese government will react.
Will the regulator watch it sink beneath its debt pile, as a warning to others who have trodden the same path, or will the watchdog throw it a lifeline?
An article published on Wednesday by our sister title Fund Selector Asia says that Evergrande is unlikely to be China’s Lehman. Even if that does turn out to be accurate, the range of possible outcomes remains vast.
Piece by piece
Evergrande started life as a property developer but spiralled into a multitude of sectors; including electric cars, football teams, theme parks and life assurance.
All things that fit naturally together one would probably not argue.
Carrying debt worth $300bn (£220.4bn, €256.7bn), it has missed dividend and interest payments and there are reports that some staff have not received salaries.
So, a natural step would be to sell assets to cover those liabilities.
And up on the chopping block seems to be Evergrande Life Assurance, according to Bloomberg.
Steven Lam, analyst at Bloomberg Intelligence, says the 50% stake in the insurer may fetch $600m at 0.5x book value.
No official statement has been made about the life insurance business yet, but Evergrande confirmed on 28 September that will sell 1.75 billion non-publicly traded domestic shares in Shengjing Bank – representing at 19.93% stake.
The acquirer is Shenyang Shenjing Finance Investment Group.
The Hong Kong stock exchange announcement confirmed the price at RMB 5.70 per share, which will generate just under RMB 10bn (£1.14bn, $1.55bn, €1.32bn) for Evergrande.
Even combining the proceeds of the life insurance and banking stakes – which is just under $2bn – the company still has a long way to go to climb out of the $300bn hole in which it finds itself.