(Yicai) Aug. 30 -- Shares of Kingboard Holdings dropped after the Chinese maker of laminates agreed to become one of the major shareholders of Country Garden Holdings as the cash-strapped real estate giant will repay a debt of HKD270 million (USD34 million) by issuing shares to the creditor.

Kingboard's stock price [HKG: 0148] closed 4.1 percent lower at HKD17.38 (USD2.20). Meanwhile, shares of Country Garden [HKG: 2007] declined by 3.3 percent to 88 Hong Kong cents (10 US cents).

Country Garden will issue 350.6 million shares to Hong Kong-based Kingboard and the price is 77 Hong Kong cents apiece, the Foshan-based property developer said in a statement today.

Kingboard will hold a nearly 1.3 percent stake in Country Garden after the issuance. Only chairwoman Yang Huiyan, who has a 52.6 percent stake in the company, and institutional shareholders such as Ping An Insurance, JPMorgan Chase & Co., UBS, and Vanguard Group have larger holdings, according to public information.

Kingboard lent HKD1.9 billion (USD242.2 million) to Country Garden in December 2021. The real estate developer has not yet repaid around HKD1.6 billion of principal and interest, excluding a payment of HKD319 million that the firm has agreed to complete and the above-mentioned share issuance.

In mid-August, Country Garden admitted its liquidity crisis and suspended trading of 11 domestic bonds to promote debt restructuring. The bonds’ balance totaled CNY15.7 billion (USD2.2 billion) and the earliest due date is Sept. 2.

Country Garden is not alone as China's property downturn affects most developers. Country Garden predicted on Aug. 10 that its first-half net loss could be CNY45 billion or even as high as CNY55 billion. From January to July, sales dropped by 35 percent to CNY140.8 billion (USD137.2 million), it added.

Editors: Dou Shicong, Emmi Laine