- China Evergrande will sell half of its property management unit to Hopson Development for more than $7 billion
- A crackdown on debt has left Evergrande unable to refinance around US$305 billion (A$420 billion) in liabilities
- Beijing has reportedly urged government-owned firms and state-backed property developers to purchase some of Evergrande’s assets
- The group faces deadlines on dollar bond coupon payments totalling US$162.38 million (A$223.5 million) in the next month
Flailing developer China Evergrande will sell half of its property management unit to Hopson Development for more than $7 billion after both companies sought trading halts ahead of a major transaction.
Evergrande, which was once the country’s top-selling developer, is facing what could be one of China’s largest-ever restructurings as a crackdown on debt leaves it unable to refinance around US$305 billion (A$420 billion) in liabilities.
According to China’s state-backed Global Times, Hopson Development is the buyer of a 51 per cent stake in Evergrande Property Services Group for more than HK$40 million (A$7 billion). Hopson said it has suspended trading pending an announcement related to a major acquisition of a Hong Kong-listed firm and a possible mandatory offer.
However, the potential deal seems to have renewed broader concerns about the risk of contagion, or of a hit to China’s property market and the wider economy if Evergrande — with liabilities equal to two per cent of China’s GDP — collapses or is liquidated at rock-bottom prices.
“Looks like the property management unit is the easiest to dispose in the grand scheme of things, indicative of the company trying to generate near term cash,” OCBC analyst Ezien Hoo said.
“I’m not sure this necessarily means that the company has given up on surviving, especially as selling an asset means they are still trying to raise cash to pay the bills.”
Beijing has reportedly urged government-owned firms and state-backed property developers to purchase some of Evergrande’s assets, according to Reuters.
Initial worries have somewhat eased after China’s central bank vowed to protect homebuyers’ interests, but ramifications for the country’s economy have kept investors on edge.
Still, shares in Evergrande have dropped 80 per cent this year, while shares in its property unit have fallen 43 per cent.
The group faces deadlines on dollar bond coupon payments totalling US$162.38 million (A$223.5 million) in the next month.