Evergrande says a $2.6 billion sale has collapsed as another payment deadline looms

 


Evergrande has called off plans for a multibillion-dollar deal for its property management unit, worsening its cash crunch as the Chinese real estate giant teeters on the brink of collapse.

The company announced late Wednesday that it had terminated an agreement to sell a controlling stake of Evergrande Property Services to rival Chinese developer, Hopson, for about 20 billion Hong Kong dollars (roughly $2.6 billion).
The deal, which was announced earlier this month, was scuppered after Evergrande "had reason to believe ... that the purchaser had not met the prerequisite to make a general offer for shares in Evergrande Property Services," the conglomerate said in a stock exchange filing.
    Hopson, in its own statement, has said that it "does not accept that there is any substance whatsoever" to Evergrande's cancellation of the sale.
      "Until now," Hopson had been "prepared to complete the sale ... in accordance with the agreement," it said Wednesday.
      But Hopson added that "other parties" had wanted to change the agreed terms of the deal, including terms of payment, which it found "unacceptable."
      Shares of both companies, which had been suspended from trading since the potential deal was announced, resumed trade Thursday in Hong Kong. Evergrande plummeted nearly 11%, while Hopson surged 5.2%.
      Evergrande, one of China's largest real estate developers, is currently buckling under a mountain of debt, with more than $300 billion worth of liabilities. Its shares have crashed some 80% this year.
      In recent weeks, the company has been trying to resolve its cash flow issues by attempting to sell some of its assets, such as partial stakes in its electric vehicle and property services businesses, as well as an office tower in Hong Kong.
      But the company hasn't had much luck in its search for buyers.
      In another stock exchange filing Wednesday, the group said that there had been "no material progress" on the sales of its other assets, apart from a previously disclosed stake sale in a local lender.
      That deal, which was announced late last month, will offload part of Evergrande's interest in Shengjing Bank for nearly 10 billion yuan (about $1.5 billion).
      The failed sale leaves Evergrande in an even more tenuous situation than before. The company appeared to have failed to pay $83.5 million worth of interest on a dollar-denominated bond due September 23, and it's fast approaching the end of the 30-day grace period it had to fulfill that payment.
      Evergrande isn't the only player struggling. Recently, a slew of other developers have disclosed their own cash flow issues, asking lenders for more time to repay them or warning of potential defaults.
      Beijing-based Modern Land is one of those developers. Last week, the company asked investors for more time to repay a $250 million bond due on October 25, highlighting its own liquidity problems.
      Its shares were suspended from trade in Hong Kong on Thursday as it disclosed an upcoming announcement, without giving further details.
      Authorities have tried to calm the situation as investors fret over the risks of contagion. Last week, China's central bank said that Evergrande had mismanaged its business, but risks to the financial system were "controllable."
      That was echoed by Chinese Vice Premier Liu He at a financial forum in Beijing on Wednesday.
      In a speech reported by Chinese state-run news agency Xinhua, Liu acknowledged what he called "individual problems" in the real estate market.
        But he stressed that risks were generally under control, the capital needs of property developers were being met, and the overall trend of "healthy development" of China's real estate market would not change, according to Xinhua.
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