Evergrande Shares in China Dip as Deal Crashes

Evergrande Shares in China Dip as Deal Crashes

Shares of China Evergrande Group, the second-most indebted real estate developer in the global economy, fell 14% when they resumed trading on the Hong Kong Stock Exchange after a two-week suspension.
Thursday’s opening bell liquidation came after Evergrande announced that a deal to sell a $ 2.6 billion stake in its real estate services unit had failed.

Evergrande recovered some of its earlier losses, but was still down 9.8% in subsequent trade. Its real estate services unit fell 5%, while its electric vehicle business fell 10.3%. Hopson rose 5.6%.

Shenzhen-based Evergrande was once the best-selling developer in China, but as it grapples with more than $ 300 billion in debt, investors have grown concerned. In recent days, government officials have come out in force to say that the company’s problems are not going to get out of hand and trigger a wider financial crisis.

Evergrande said on Wednesday it had canceled an agreement to sell a 50.1% stake in Evergrande Property Services Group to Hopson Development Holdings, a Hong Kong-based company, after the smaller rival had failed to meet “the prerequisites for making a general offer ”.

Both sides appeared to blame each other for the setback, with Hopson saying she did not accept that there was “any substance” to Evergrande’s termination of the sale contract and was exploring options. to protect its interests.

The deal is the second to collapse as the developer scrambles to raise funds. Two sources told Reuters news agency last week that the $ 1.7 billion sale of its Hong Kong headquarters failed amid buyers’ concerns over Evergrande’s dire financial situation.

The latest setback comes as a 30-day grace period expires for Evergrande to pay $ 83.5 million as part of its payments for an offshore bond. If he cannot do so, he will be considered in default.

Evergrande, in a document filed Wednesday, said the grace periods for paying interest on its U.S. dollar-denominated bonds that became due in September and October had not expired. He did not specify.

“The abandoned transaction made it even more unlikely [Evergrande] to pull a rabbit out of a hat at the last minute, ”a lawyer representing some of the creditors told Reuters, requesting anonymity because he was not authorized to speak to the media.

“Given the situation with missed payments and the soon to be running out of grace period, people are bracing for a permanent default. We will see how the company approaches this problem in its negotiations with creditors.

Evergrande was first listed in Hong Kong in 2009, raising HK $ 70.5 billion ($ 9 billion) in its initial public offering, making it the largest company China’s private real estate company and its founder, Xu Jiayin, the richest man on the continent at the time.

In a wave of expansion, Xu – also known as Hui Ka Yan in Cantonese – bought the then struggling Guangzhou soccer team in 2010, renaming it Guangzhou Evergrande and spending a fortune on players and coaches. high level.

The group has also diversified into other sectors, notably bottled water and electric vehicles.

But Evergrande began to falter after a government crackdown on developers in August 2020, which forced the group to sell properties at increasingly steep discounts.


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