Hong Kong: Chinese media reported on Monday that China Evergrande would sell a majority stake in its asset management business for more than $ 5 billion.
While China’s highest-selling asset group, Evergrande is facing one of the country’s biggest restructuring as the company suffers from about $ 305 billion in debt. Uncertainty about Evergrande’s fate has left financial markets unconcerned about any fall from its troubles.
Evergrande said on Monday it had asked Hong Kong to suspend trading of its shares as the announcement of a major transaction was pending. The Evergrande Property Services Group, which was listed last year, also called for a halt, citing it as a “potential public offering” for the company’s shares.
The Chinese state-backed Global Times reported that HK had bought a 51% stake in the Hobson Development real estate business for $ 40 billion ($ 5.1 billion), citing other unnamed media reports. Hobson said he had stopped trading in shares of the Hong Kong-listed company because of the announcement of a major acquisition and a mandatory offer.
Neither Hobson nor Evergrande responded to requests for comment from the Global Times report.
Potential contract signals The company is still working to fulfill its obligations, analysts said. But if Evergrande were disbanded at a lower price it would re-ignite widespread concerns about the risk to China’s property sector and economy.
“Selling a property means they are trying to raise more money to pay the bills,” said OCBC analyst Ezien Hoo. “The asset management unit seems to be easy to eliminate in the biggest project.”
Theoretically, the proceeds from the $ 5 billion sale would be enough to pay off short-term debtors, with Evergrande only finding $ 500 million in coupon payments by the end of this year and facing a $ 2 billion bond maturity in March.
The price for the Services Group’s December 2020 listing estimate represents a discount of approximately 17.5%.
H.K. Shares of Hobson, with a market value of $ 60.4 billion ($ 7.8 billion), have risen 40% so far this year and were rated B + by Pitch in June.
Evergrande’s property services business, which manages 810 million square meters at the end of June, is expected to post a profit in the first half of 2021, according to its financial statements.
With liabilities equal to 2% of China’s GDP, Evergrand has raised concerns that its problems could spread through the global financial system.
Tensions have eased after China’s central bank promised to protect the interests of homebuyers, but the impact on China’s economy has kept investors on edge – especially as signs of distress began to spread to Evergrande’s colleagues.
Credit rating agency Fitch on Monday downgraded asset developer Fondasia Holdings by four points.
The stock market suspension on Monday weighed on the Hong Cheng benchmark index, beating the offshore yuan, which fell 0.3% against the dollar.
However, the potential contract action raised shares of Evergrand’s electric vehicle division by 29%, but caused a downturn in regional stocks and global markets.
“This is definitely a positive step towards resolving Evergrande’s liquidity crisis and we expect more to come,” said Carey Ng, Asia Pacific senior economist at Notices.
“However, to say that unloading some assets would not be entirely sufficient is to say that Evergrande’s main feature is project construction and sale of inventory.”
Shares of Evergrande have fallen 80% so far this year, while its bonds have remained stable at tragic levels.
The group negotiated a deal with some local bonds last month and returned some of the wealth management products held by some retail investors.
Bonders say the company’s $ 20 billion in debt is reappearing on the list of lenders and has not received interest payments over the past few weeks.
Evergrande faces a $ 162.38 million bond coupon payout in October.
(This story was not edited by NDTV staff and was automatically created from a syndicate feed.)