Evergrande calls for trading halt amid talk of sale to rival

Rival Hopson Development said to be eyeing 51% stake in Evergrande Real Estate for $7b

Embattled Chinese developer Evergrande Group called for a trading halt on its shares yesterday as speculations mount over a possible sale of its real estate unit to another Chinese developer.

Rival Hopson Development is reportedly set to buy a 51 per cent stake in Evergrande Real Estate for HK$40 billion (S$7 billion), said Chinese news outlet Cailian. The Guangzhou-based developer has not confirmed the purchase, but has also for a trading halt on its shares.

Evergrande, China's second-largest developer, has been trying to stay afloat amid liabilities of over 1.97 trillion yuan (S$415 billion) since last year, after regulators in Beijing imposed lending restrictions to curb property firms' ballooning debt. But two missed bond payments late last month worth US$129 million combined have triggered worries that the world's most indebted developer's liquidity challenges might have become insurmountable.

Evergrande called for the trading halt, pending the release of "an announcement containing inside information about a major transaction", according to a filing with the Hong Kong Stock Exchange.

Hopson said in a filing with the Hong Kong Stock Exchange that it has agreed to acquire the shares of a listed company, without further specifications.

Hopson was founded in 1992 and is headed by Ms Zhu Jurong. Her father Zhu Mengyi was the company's founder and chairman. Ms Zhu made headlines when she became the company chairman last year aged 31.

Mr Bo Zhuang, a senior sovereign analyst at investment management firm Loomis Sayles, told The Straits Times that the sale of Evergrande's real estate unit is "part of the bigger effort to raise money to repay their debt and continue its existing operations".

"Evergrande's trading halt is due to the major transaction of asset disposal," added Mr Zhuang, whose work focuses on China.

The possible collapse of Evergrande, once considered among China's "too-big-to-fail" firms, sparked concerns of the contagion spreading in the world's second-largest economy's financial and property markets when it missed a key payment deadline on its bonds on Sept 24.

To address the possible contagion, the central bank pumped 460 billion yuan into the banking system over a five-day stretch last week to ease liquidity. The additional liquidity is meant to lift banks' confidence to lend to developers and other companies in the property industry, including construction.

Investors have been watching for any signs of government bailout after Evergrande missed the two payment deadlines last month. Beijing is suspected to be behind Evergrande's disposal of assets to raise funds for its debts. Regulators are also keeping an eye on how retail investors and home buyers in China respond to Evergrande's disposal of assets, as Beijing is said to prioritise their returns for fear of social unrest.

Both groups have staged protests either over missed payments on their investments or stalled construction of their future homes.

The possible sale of Evergrande's real estate unit also comes after the company said in an exchange filing on Sept 29 that it was selling a stake it held in Shengjing Bank for about 9.99 billion yuan. The proceeds from the sale are expected to go towards Evergrande's debts with the bank.

Evergrande shares have plunged 80 per cent so far this year.

A version of this article appeared in the print edition of The Straits Times on October 05, 2021, with the headline 'Evergrande calls for trading halt amid talk of sale to rival'. Subscribe