China's Evergrande seeks new sources of funding its bottled water business

China Evergrande Group is considering an initial public offering in Hong Kong for its bottled water business, people with knowledge of the matter said, as the country’s most indebted real estate developer seeks new sources of funding.

The company is holding exploratory discussions with investment banks on a separate listing for Evergrande Spring, said the people, asking not to be identified as the information is private. A potential IPO could raise several hundred million dollars and take place next year, the people said.

Shenzhen-based Evergrande has been selling equity in non-property assets and accelerating property sales to reduce leverage, yet it is struggling to restore confidence among investors. China Evergrande Group owns a 49% stake in Evergrande Spring, according to its 2020 annual report.

Read More: Evergrande Resumes Downward Spiral as Investors Prep for Crisis

Shares and dollar bonds of Evergrande slumped Monday after a court ordered the freezing of a bank deposit held by its onshore division. The stock fell as much as 17% in Hong Kong trading. Evergrande said in response that it will sue the lender, according to a statement.

Deliberations are at an early stage and Evergrande could decide to keep the business, the people said. A representative for Evergrande didn’t immediately respond to queries by email and phone.

Evergrande Spring offers over 50 products in the mineral water, grocery, dairy and fresh food segments, according to the parent company’s website. Its products are available in more than 30 provinces and cities across China, as well as over 10 countries and regions participating in the country’s Belt and Road Initiative. Evergrande Spring has established partnerships with over 1,000 distributors and more than 500,000 sale outlets across China, according to the annual report.