HONG KONG: Embattled property giant China Evergrande suspended trading in its shares in Hong Kong yesterday pending an announcement on a "major transaction", as the firm struggles in a sea of debt and faces a default. The halt came as reports said Hong Kong real estate firm Hopson Development Holdings planned to buy a 51 percent stake in Evergrande's property services arm as the troubled giant tries to offload assets to meet its obligations.
"At the request of the Company, trading in the shares of the Company was halted at 9:00 a.m. on 4 October 2021 pending the release by the Company of an announcement containing inside information about a major transaction," Evergrande said in a statement to the Hong Kong stock exchange. Trading in Hopson was also suspended "pending the release of announcement(s) in relation to a major transaction", according to a company statement to the exchange. Bloomberg Intelligence analyst Patrick Wong said the suspension may be related to a major asset disposal or capital restructuring.
Evergrande Property Services Group was also suspended but the firm's electric vehicle company, which last week scrapped a proposed Shanghai listing, continued to trade and rose nearly 30 percent. Hong Kong's Hang Seng Index lost more than two percent. Officials at the firm have been struggling to deal with a crisis that has left it more than $300 billion in debt, fuelling fears of a contagion for the wider Chinese economy that some warn could spread globally. Last week it said it would sell a $1.5 billion stake in a regional Chinese bank to raise much-needed capital, as it struggles to make interest payments to bondholders.
Beijing has stayed silent on the travails of the property empire, but state media has trailed various responses in a nod to the mood towards a private company that grew on a debt binge in the boom years of Chinese real estate. And on Wednesday the People's Bank of China said the country's financial sector must meet the goals of "stabilizing land and housing prices" and "insist on not using real estate as a short-term economic stimulus". It also stressed that "houses are used for living, not speculation".
Company officials have hired experts including financial services firm Houlihan Lokey-which advised on the restructuring of Lehman Brothers when it went under during the global financial crisis-as they try to avoid a collapse. State regulators have also sent a team of financial advisers to assess the company, according to reports.
"There still remains very little visibility from the Chinese Government over Evergrande's fate, although a slow and steady dismantling of the company appears to be the favored course right now," said OANDA's Jeffrey Halley. The firm last month agreed a deal to pay interest on a domestic bond but there has been no news about repayments on two offshore notes, though it has a 30-day grace period before it is considered to be in default.
It was also due to pay on another foreign note yesterday, though that only has a five-day grace period, raising fears it could soon default. "The first obligation is going to make sure that homeowners who bought those homes take delivery and are made whole," Marathon Asset Management CEO Bruce Richards said. "At the very end of the pecking order are offshore bondholders."
The liquidity crunch has triggered public anger and rare protests outside Evergrande's offices in China as investors and suppliers demand their money back. The group has admitted facing "unprecedented challenges" and warned that it may not be able to meet its liabilities. The country's real estate sector has been under tightened scrutiny in recent months, with regulators announcing caps for three different debt ratios in a scheme dubbed "three red lines" last year. - AFP