Home Uncategorized China Evergrande shares fall sharply after $2.6bn asset sale collapses

China Evergrande shares fall sharply after $2.6bn asset sale collapses

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China Evergrande shares fall sharply after $2.6bn asset sale collapses

Evergrande

China Evergrande shares fall sharply after $2.6bn asset sale collapses

‘No guarantee’ Chinese property giant can meet its $305bn debts, starting with a deadline on Monday that could trigger default

a general view of the Evergrande Center building in Shanghai

In a stock exchange filing late on Wednesday, Evergrande said it had reason to believe that Hopson had not met the “prerequisite to make a general offer” for its unit, without elaborating further.

Hopson said in an exchange filing that it had been prepared to complete the deal but had received a transaction termination notice from Evergrande on 13 October.

Shares in Evergrande, Evergrande Property Services and Hopson had all been suspended since 4 October pending the deal announcement.

In a separate exchange filing on Wednesday, Evergrande said it had made no material progress in selling other assets it has put on the block except for its sale of a stake worth $1.5bn in Chinese lender Shengjing Bank.

The setback for Evergrande comes after Chinese state-owned Yuexiu Property pulled out of a proposed $1.7bn deal to buy its Hong Kong headquarters last week.

Evergrande’s disclosures came after a number of top Chinese officials had sought to reassure homebuyers and markets that the current woes in the property sector would not be allowed to turn into a full-scale crisis.

Worries that a cash crunch at Evergrande, whose liabilities are equal to 2% of China’s gross domestic product, could cause economic contagion have seen swathes of other heavily indebted developers hit with credit rating downgrades, while some smaller ones have already defaulted.

In comments reported by state media Xinhua and echoing words from the country’s central bank late last week, vice-premier Liu He told a Beijing forum on Wednesday that the risks were controllable, and that reasonable capital demand from property firms was being met.

The chairman of China’s securities regulator, Yi Huiman, added at the same forum that authorities would properly handle the default risks and look to curb excessive debt more broadly.

“[We need] to improve the effectiveness of the constraint mechanism on debt financing, to avoid excessive financing through ‘high leverage’,” Yi said.

Evergrande: will it collapse and what would happen if it did?

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Chinese property developers have total outstanding debt of 33.5tn yuan ($5.24tn), according to Nomura, equivalent to roughly a third of the country’s gross domestic product.

Evergrande, which has epitomised China’s freewheeling era of borrowing and building, has been scrambling to raise funds to pay its many lenders and suppliers, amid expectations it is about to formally default on one of its international bonds.

In its Wednesday filing, Evergrande said it would continue to implement measures “to ease the liquidity issues” and would use best efforts to negotiate for the renewal or extension of its borrowings with its creditors.

“In view of the difficulties, challenges and uncertainties in improving its liquidity, there is no guarantee that the group will be able to meet its financial obligations under the relevant financing documents and other contracts,” it said.

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Published at Thu, 21 Oct 2021 05:35:24 +0000

https://www.theguardian.com/business/2021/oct/21/china-evergrande-shares-fall-sharply-after-26bn-asset-sale-falls-through

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