Chinese conglomerate Baoneng Group is continuing to shed its stakes in property developer China Vanke Co. after its failed takeover bid last month attracted the attention of anti-leverage regulators.
Baoneng has reduced its holdings to 22.8% from 25.4% according to the Hong Kong Stock Exchange, where the company is listed. The sell-off follows the company’s plans for a highly-leveraged buyout of Vanke being made public. Baoneng is likely trying to avoid too much scrutiny over its actions from China’s financial regulators, which are currently clamping down on corporate borrowing.
Utilizing its subsidiary Shenzhen Jushenghua Industrial Development Co., Baoneng set up nine asset management plans to borrow capital for the Vanke takeover. The subsidiary’s leverage ratio was 2:1, reports Caixin Global, meaning it borrowed twice as much as it invested into the plans.
As a result, Jushenghua has had to shut down its AMPs by selling Vanke shares, in accordance with new government rules that ban AMPs from rolling over their debts.