China’s embattled Evergrande flags ‘major transaction,’ trading halted

Embattled Chinese real estate developer Evergrande on Monday announced an imminent “major transaction” and trading of the company’s shares in Hong Kong was halted pending the news.

Trading of Evergrande’s management business, Evergrande Property Services, was also stopped Monday, with the business unit saying that the announcement constitutes “a possible general offer for the shares of the Company.”

At the same time, trading of rival property developer Hopson Development ceased. Chinese state media Global Times reporting that Hopson is expected to buy 51 percent of Evergrande’s management unit for more than $5 billion.

The report comes about a week after Evergrande said it would sell a $1.5 billion stake it owned in Shengjing Bank to a state-owned firm.

Evergrande — which has amassed more debt than any other real estate developer in the world — faces a cash crunch that could see it default on its loans if it’s unable to meet upcoming deadlines.

A worker walks past an advertisement photo of a property project of China Evergrande Group outside its headquarters in Hong Kong.AP

The company’s warnings in recent weeks that it may default on its $300 billion in liabilities have spooked markets globally as investors worry about the fallout hitting international bondholders.

Beijing has so far indicated it would be unwilling to bail out the company in the event of a default as the Chinese government continues to crack down on companies that have ran up debt over the years to fuel growth.

But Wall Street analysts have suggested that they expect Beijing to be able to contain the fallout.

A screen displays the Hong Kong share index at the Hong Kong Stock Exchange.AP

The company’s asset sales will likely help it meet debt obligations that are due this week, including a dollar note worth $260 million, issued by Jumbo Fortune Enterprises and guaranteed by Evergrande that’s set to mature on Monday.

Evergrande’s Hong Kong-listed shares are down more than 80 percent since Jan. 1. On Monday, they were worth about 2.95 Hong Kong dollars per share before trading was halted.

Fears over the Evergrande fallout as well as slowing global economic growth helped send Hong Kong’s Hang Seng index down more than 2 percent Monday.

Pedestrians walk past a stock ticker outside Exchange Square, the building housing the Hong Kong Stock Exchange.EPA
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