(Yicai Global) June 7 -- Construction and engineering giant China Railway Construction is selling its 49 percent stake in a subsidiary of debt-ridden real estate developer China Evergrande Group at an asking price of CNY2.6 billion (USD400 million), China Beijing Equity Exchange reported yesterday.

China Railway bought the holdings in Evergrande Real Estate in December 2019 for CNY2.3 billion (USD345 million) with Evergrande Group holding the remaining equity. The firm, which is under the State-owned Assets Supervision and Administration Commission of the State Council, holds shares in several of Evergrande Group’s subsidiaries.

But Evergrande Real Estate, whose projects are unclear, is barely ticking over. In January and February it logged profit of just CNY57,800 (USD8,670) on revenue of CNY106,900. And last year it lost CNY248 million (USD37 million) with revenue of just CNY2 million (USD300,000). The Shenzhen-based company had net assets of CNY4.6 billion (USD690 million) as of the end of February and registered capital of CNY4.7 billion.

Its parent firm, with an estimated CNY2 trillion (USD300 billion) in debt, is in no position to bail it out. Evergrande Group defaulted on a USD400 million debt in December last year and with the recent Covid-10 outbreaks exacerbating an already cooling real estate market, the outlook looks dim. The company, once one of China’s biggest real estate developers, has promised investors and creditors at home and abroad that it will come up with a debt restructuring plan by July.

Evergrande Group’s stock [HKG:3333] stopped trading on the Hong Kong stock exchange on March 21 due to an internal probe and has yet to restart as the company failed to submit its 2021 financial report to the bourse on time. US financial services firm Morgan Stanley Capital International said yesterday that it will remove China Evergrande from its MSCI index from the close of business tomorrow due to the prolonged trading suspension.

Editor: Kim Taylor