Evergrande to sell more than $5bn stake to Hopson Development
Both companies request trading halts before a big transaction
04 October 2021 - 11:15
byTom Westbrook and Donny Kwok
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
The China Evergrande Centre building in Hong Kong. Picture: REUTERS/TYRONE SIU
Hong Kong — Distressed developer China Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5bn, Chinese media said on Monday, after both Evergrande and Hopson requested trading halts ahead of a major transaction.
Once China’s top-selling developer, Evergrande is facing what could be one of the country’s largest-yet restructurings as a crackdown on debt leaves it unable to refinance $305bn in liabilities.
Evergrande said it requested a trading halt pending an announcement about a major transaction and Evergrande Property Services Group said the announcement constitutes “a possible general offer for shares of the company”.
China’s state-backed Global Times said Hopson Development is the buyer of a 51% stake in the property unit for more than HK$40bn, citing unspecified other media reports. Hopson said it has suspended trading in its shares, pending an announcement related to a major acquisition of a Hong Kong-listed firm and a possible mandatory offer.
Neither Hopson nor Evergrande responded to requests for comment on the Global Times report.
The possible deal seemed to rekindle broader concerns about the risk of contagion or of a hit to China’s property sector and the broader economy if Evergrande collapses or is liquidated at rock-bottom prices.
Pay bills
“Looks like the property management unit is the easiest to dispose in the grand scheme of things, indicative of the company trying to generate near-term cash,” said OCBC analyst Ezien Hoo.
“I’m not sure this necessarily means that the company has given up on surviving, especially as selling an asset means they are still trying to raise cash to pay the bills.”
Beijing has prodded government-owned firms and state-backed property developers to purchase some of Evergrande’s assets, people with knowledge of the matter said last week.
It is unclear whether Hopson’s statement is related to Evergrande Group. However, Hopson stands in good stead compared with other property developers, owning more assets than liabilities, improving profit in the first half and paying a dividend.
Shares of Hopson, which has a market value of HK$60.4bn, have jumped 40% so far this year and it was rated B+ by Fitch in June.
Reverbrate worldwide
Evergrande’s property development unit was also profitable in the first half of 2021 and revenue rose compared with a year earlier.
With liabilities equal to 2% of China’s GDP, Evergrande has sparked concerns its woes could spread through the financial system and reverberate worldwide.
Initial worries have eased somewhat after China’s central bank vowed to protect homebuyers’ interests, but ramifications for China’s economy kept investors on edge.
Monday’s share trading suspension sent a shiver through the offshore yuan, which fell about 0.3% against the dollar, and weighed on the Hang Seng benchmark index, especially financials and other developers.
“[The] consensus is expecting a restructuring, but authorities to limit systemic risk from Evergrande,” said Bank of Singapore analyst Moh Siong Sim. But there is “a bit of nervousness”, he added.
Guangzhou R&F Properties fell 6%, while Sunac China Holdings and Country Garden stocks came under pressure before paring losses. Shares in Evergrande’s electric vehicle unit rose more than 10%.
Made repayment
Shares in Evergrande have plunged 80% so far this year, while its bonds trade at distressed levels. Shares in its property services unit have dropped 43% as the group scrambles to pay its many lenders and suppliers.
The cash-strapped group said last month that it had negotiated a settlement with some domestic bondholders and that it had made a repayment on some wealth management products, largely held by Chinese retail investors.
Holders of the company’s $20bn in offshore debt appear further back in the queue and bondholders have said interest payments due on bonds in recent weeks have failed to arrive.
Evergrande faces deadlines on dollar bond coupon payments totalling $162.38m in the next month.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Evergrande to sell more than $5bn stake to Hopson Development
Both companies request trading halts before a big transaction
Hong Kong — Distressed developer China Evergrande will sell a half-stake in its property management unit to Hopson Development for more than $5bn, Chinese media said on Monday, after both Evergrande and Hopson requested trading halts ahead of a major transaction.
Once China’s top-selling developer, Evergrande is facing what could be one of the country’s largest-yet restructurings as a crackdown on debt leaves it unable to refinance $305bn in liabilities.
Evergrande said it requested a trading halt pending an announcement about a major transaction and Evergrande Property Services Group said the announcement constitutes “a possible general offer for shares of the company”.
China’s state-backed Global Times said Hopson Development is the buyer of a 51% stake in the property unit for more than HK$40bn, citing unspecified other media reports. Hopson said it has suspended trading in its shares, pending an announcement related to a major acquisition of a Hong Kong-listed firm and a possible mandatory offer.
Neither Hopson nor Evergrande responded to requests for comment on the Global Times report.
The possible deal seemed to rekindle broader concerns about the risk of contagion or of a hit to China’s property sector and the broader economy if Evergrande collapses or is liquidated at rock-bottom prices.
Pay bills
“Looks like the property management unit is the easiest to dispose in the grand scheme of things, indicative of the company trying to generate near-term cash,” said OCBC analyst Ezien Hoo.
“I’m not sure this necessarily means that the company has given up on surviving, especially as selling an asset means they are still trying to raise cash to pay the bills.”
Beijing has prodded government-owned firms and state-backed property developers to purchase some of Evergrande’s assets, people with knowledge of the matter said last week.
It is unclear whether Hopson’s statement is related to Evergrande Group. However, Hopson stands in good stead compared with other property developers, owning more assets than liabilities, improving profit in the first half and paying a dividend.
Shares of Hopson, which has a market value of HK$60.4bn, have jumped 40% so far this year and it was rated B+ by Fitch in June.
Reverbrate worldwide
Evergrande’s property development unit was also profitable in the first half of 2021 and revenue rose compared with a year earlier.
With liabilities equal to 2% of China’s GDP, Evergrande has sparked concerns its woes could spread through the financial system and reverberate worldwide.
Initial worries have eased somewhat after China’s central bank vowed to protect homebuyers’ interests, but ramifications for China’s economy kept investors on edge.
Monday’s share trading suspension sent a shiver through the offshore yuan, which fell about 0.3% against the dollar, and weighed on the Hang Seng benchmark index, especially financials and other developers.
“[The] consensus is expecting a restructuring, but authorities to limit systemic risk from Evergrande,” said Bank of Singapore analyst Moh Siong Sim. But there is “a bit of nervousness”, he added.
Guangzhou R&F Properties fell 6%, while Sunac China Holdings and Country Garden stocks came under pressure before paring losses. Shares in Evergrande’s electric vehicle unit rose more than 10%.
Made repayment
Shares in Evergrande have plunged 80% so far this year, while its bonds trade at distressed levels. Shares in its property services unit have dropped 43% as the group scrambles to pay its many lenders and suppliers.
The cash-strapped group said last month that it had negotiated a settlement with some domestic bondholders and that it had made a repayment on some wealth management products, largely held by Chinese retail investors.
Holders of the company’s $20bn in offshore debt appear further back in the queue and bondholders have said interest payments due on bonds in recent weeks have failed to arrive.
Evergrande faces deadlines on dollar bond coupon payments totalling $162.38m in the next month.
Reuters
Fitch downgrades Evergrande as Chinese developer misses another payment
China’s WeChat clamps down on Evergrande messaging groups
BlackRock and Bluebay exposed to Evergrande
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Asian shares slip on fears over Chinese property sector and inflation
JSE to contend with renewed Evergrande concerns on Monday
ANJANI TRIVEDI: Evergrande may be a harbinger as cash crunch hits China's SMEs
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.