China Evergrande to raise $ 5 billion from sale of real estate units – Global Times

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  • Trading in Evergrande, Evergrande Property Services stopped
  • Chinese property developer Hopson’s shares also suspended
  • Hopson buys 51% stake in real estate services unit – Global Times
  • Wider market nervousness returns, offshore yuan slips

HONG KONG, Oct.4 (Reuters) – China Evergrande to sell controlling stake in its property management business for more than $ 5 billion, Chinese media said on Monday, a deal that would be the largest asset sale ever by the indebted property developer. if it advances.

Once the best-selling real estate group in China, Evergrande faces what could be one of the country’s most significant restructurings as the company is weighed down with approximately $ 305 billion in debt. The uncertainty over Evergrande’s fate has disrupted financial markets, worried about the fallout from his problems.

Evergrande (3333.HK) said Monday it has requested a halt to trading its shares in Hong Kong pending the announcement of a major transaction. Evergrande Property Services Group (6666.HK), a listed spin-off last year, also requested the shutdown and said it was referring to “a possible general offer for the shares of the company”.

The state-backed Global Times said that Hopson Development (0754.HK) was the buyer of a 51% stake in the real estate sector for more than HK $ 40 billion (HK $ 5.1 billion). dollars), citing other unspecified media reports. Hopson also said it has suspended trading in its shares, pending an announcement of a major acquisition of a Hong Kong-listed company and a possible mandatory bid.

Hopson and Evergrande did not respond to requests for comment on the Global Times report.

Analysts said the possible deal indicates the company is still working to meet its obligations. But it also rekindled wider concerns about the risk to China’s real estate sector and economy if Evergrande were to liquidate at low prices.

“Selling an asset means they’re always trying to raise money to pay the bills,” OCBC analyst Ezien Hoo said. “Looks like the property management unit is the easiest to take down in the grand scheme of things.”

In August, Reuters reported that Evergrande was in talks with public and private companies to sell stakes in its property management and electric vehicle business, citing a source familiar with the matter.

Beijing has also prompted state-owned companies and state-backed developers to buy some of Evergrande’s assets, people with knowledge of the matter told Reuters last week. Read more

Hopson is well positioned relative to other real estate developers in China, owning more assets than liabilities and improving profits in the first half of the year.

Hopson shares, which have a market value of HK $ 60.4 billion ($ 7.8 billion), have jumped 40% so far this year and were rated B + by Fitch in June.

Evergrande’s real estate services business, which says it manages a total contract floor area of ​​810 million square meters at the end of June, was also profitable in the first half of 2021, based on its financial statements.

If the deal is made at the price quoted by the Global Times, that represents a discount of around 17.5% from the Services Group’s December 2020 quote assessment.

NERVOUSNESS

With liabilities equal to 2% of China’s gross domestic product, Evergrande has raised concerns that its problems will spill over through the global financial system.

Nervousness eased after China’s central bank pledged to protect the interests of homebuyers, but ramifications for the Chinese economy have kept investors on the lookout. Read more

Monday’s suspension of stock trading pushed the offshore yuan down, which fell about 0.3% against the dollar, and weighed on the benchmark Hang Seng (.HSI).

Possible trading activity raised shares of Evergrande’s EV unit (0708.HK) by 29%, but cast a shadow over regional stocks and global markets (.MIAPJ0000PUS).

“This is definitely a positive step towards resolving the Evergrande liquidity crisis and we expect more to come,” said Gary Ng, senior Asia-Pacific economist at Natixis.

“However, that said, offloading some assets may not be completely enough, the key for Evergrande is to start construction on the project and sell inventory.”

Evergrande shares have plunged 80% so far this year, while its bonds have remained stable at troubled levels.

The group said last month it negotiated a settlement with some domestic bondholders and made a repayment on some wealth management products, largely held by Chinese retail investors.

Holders of the company’s $ 20 billion offshore debt appear further in the queue of creditors and bondholders have said interest payments owed in recent weeks have not arrived .

Evergrande faces deadlines for dollar bond coupon payments totaling $ 162.38 million in October.

($ 1 = 7.7868 Hong Kong dollars)

Reporting by Tom Westbrook in Singapore and Donny Kwok and Alun John in Hong Kong; Additional reporting by Anne Marie Roantree; Editing by Kenneth Maxwell, Shri Navaratnam and Jane Merriman

Our standards: Thomson Reuters Trust Principles.


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