China Evergrande Group raised about HK$10.6 billion ($1.4 billion) promoting shares in its electric-vehicle unit, the newest effort by the nation’s most indebted developer to spice up capital.

The sale quantities to about 2.7 % of excellent shares in China Evergrande New Vitality Car Group, the true property agency mentioned in a submitting to the Hong Kong inventory trade on Thursday.

Evergrande NEV shares tumbled because the shares had been bought at a 20 % low cost.

Evergrande has been promoting belongings to restore its stability sheet consistent with Chinese language regulators’ efforts to deleverage the property sector. The corporate was in breach of all key metrics for decreasing debt ranges — referred to as the “three pink strains” — on the finish of final yr, at the same time as lots of its friends improved.

After reporting its second straight yr of declining revenue in March, Evergrande unveiled plans to roughly halve the rest of its borrowings over the following two years. To satisfy the purpose, it must maintain share gross sales in its new companies, analysts have mentioned.

“Fairness fundraising will make up an essential supply of Evergrande’s debt discount, as discounted property gross sales won’t be sufficient to fulfill that aggressive purpose,” mentioned Bloomberg Intelligence analyst Kristy Hung. “Promoting shares of its subsidiaries could be a greater choice” given the low valuation of the dad or mum firm, she added.

The transaction will contribute 5.6 % of the 156.5 billion yuan ($24 billion) in debt that it plans to repay this yr, Hung mentioned individually in a observe.

The corporate is promoting 260 million Evergrande NEV shares at HK$40.92 apiece, in keeping with the submitting. That compares with the HK$51.15 shut on Wednesday. Evergrande plans to make use of the proceeds for basic working capital, it mentioned.

Evergrande NEV shares soared prior to now yr whereas its dad or mum slumped

The transaction will cut back the ratio of the highest 20 shareholders of the EV firm to under 90 %, serving to it take part within the subsequent step of the Hong Kong Inventory Join, Evergrande mentioned. That might enable Chinese language onshore buyers to buy shares within the unit.

Evergrande NEV shares have surged greater than 600 % prior to now yr because it elevated its deal with electrical autos, though it has but to start out manufacturing. It’s carried out just a few take a look at drives and unveiled a spread of present fashions however completed little past that.

The corporate raised $3.4 billion in January, attracting mates and enterprise associates of Evergrande chairman and billionaire Hui Ka Yan. It now has a market cap better than Ford Motor.

Evergrande may additional cut back leverage by means of an preliminary public providing of its on-line automotive and property gross sales platform later this yr, BI’s Hung mentioned. The conglomerate raised HK$16.4 billion promoting a stake within the enterprise, referred to as FCB Group, in March.

Whereas Evergrande has a “sensible path to materially cut back its complete debt,” lessening reliance on short-term borrowing will likely be tougher, Fitch Scores analysts wrote final month. Nearly 47 % of the developer’s debt on the finish of 2020 is short-term borrowings that mature this yr, firm knowledge present.