Aerial photos taken on September 17, 2021 show a residential complex of Evergrand, a Chinese property developer in Huain, East Jiangsu Province, China.
Stringer | AFP | Getty Images
Indexed developer Evergrand is set to sell some of its assets in its property services unit, the second asset sale in a few weeks among liquidation-shrinking property giants to raise cash.
Shares of EverGrand and EverGrand Property Services closed trading Monday morning. In a filing on the Hong Kong Exchange, Evergrande said it had requested a halt to trading before announcing a “major transaction”.
Evergrand Property Services said the announcement constitutes “a potential general offer for the company’s shares.”
Chinese developer Hopson has suspended trading in its shares, citing the impending announcement of a “big deal” to acquire shares of the Hong Kong-listed company. China’s state-run news agency Global Times, citing unnamed media reports, said Evergrand would sell 51% of its property services to Hopson for more than 5 billion.
Last week, Evergrande said it would sell শে 1.5 billion worth of shares of Shenzhen Bank to a state-owned asset management firm.
Evergrand’s debt has left investors worried as it has twice warned that it could default, destabilizing the market. The property giant has also missed interest payments on two offshore bonds in recent weeks, leaving foreign investors stranded. So far, the company has remained silent on this payment.
With more than ০০ 30,000 billion in debt, Evergrand is trying to offload the stakes on other assets.
It sold property units to suppliers and contractors to offset some of its outstanding payments. As of Aug. 27, the amount owed was about 25.17 billion yuan ($ 3.8 billion), according to Evergrand’s latest financial statement.
Vishnu Barathan, head of the economics and strategy department at Mizuho Bank, said, “The goal of fulfilling responsibilities and disposing of partial assets is relatively rare.”
“The real question is whether there will be a sustainable financing / cash-flow system to keep the property sector an ongoing concern,” he told CNBC, referring to efficient businesses that generate cash flow rather than liquidated by liquidation.
Verthan added: “The bigger issue is that with the wall of obligation, it’s important to restore confidence. Where the general aspect is still pointing to the bee line of creditors and the panic of home buyers.”
Evergrand has yet to face another deadline – a 26 260 million one-dollar note issued by Jumbo Fortune Enterprise and Evergrand’s guaranteed, maturity on Monday.
Verthan said non-payment would be a default and would put pressure on the yuan.