Evergrande intends to sell its majority stake in the property management business. In this regard, the Chinese real estate giant may cash in on $5 billion, according to the international press. Therefore, if the plan goes ahead, this deal will be the largest asset sale ever by an indebted real estate developer.
Evergrande is mired in debt valued at about $305 billion. As a result, the top-selling real estate group in China is facing one of the biggest restructurings in the country.
The uncertainty over Evergrande's fate has unsettled financial markets, worried about the consequences of its troubles.
Earlier this week, Evergrande requested a suspension of trading in its Hong Kong shares, pending the announcement of a major transaction. Evergrande Property Services Group, a spin-off listed last year, also requested a suspension. This one prefers to wait for "a possible general offering of the company's shares."
According to the Global Times, Hopson Development is that it would buy 51% of the real estate business for more than $5.1 billion. But Hopson said it has suspended trading in its shares. This one is also waiting for an announcement related to a major acquisition of a Hong Kong-listed company and a possible mandatory offer.
If the deal goes ahead at the price reported by the Global Times, that will represent a discount of about 17.5% on the Service Group's December 2020 list valuation
To some analysts, the possible settlement indicates that the company is still working to meet its obligations. By consegunite, it rekindles broader concerns about the risk to China's real estate sector and economy if Evergrande is liquidated at low prices.
"Selling an asset means they are still looking to raise cash to pay the bills," said OCBC analyst Ezien Hoo. "It seems that the property management unit is the easiest to dispose of in the grand scheme of things."
In August, Evergrande was in negotiations with state and private companies to sell stakes in its electric vehicle and property management businesses.
Beijing has also encouraged state-owned companies and state-backed developers to buy some of Evergrande's assets, the BBC reports.
Hopson is better positioned compared to other Chinese real estate developers. This company has more assets than liabilities and improved profit in the first half of the year.
Hopson's shares, with a market value of $7.8 billion, are up 40% this year. As a result, it was rated B+ by Fitch in June.
Evergrande's real estate services business, which claims to have managed a total contracted area of 810 million square meters at the end of June, was also profitable in the first half of 2021, based on its financial statements.
If the deal goes ahead at the price reported by the Global Times, that will represent a discount of about 17.5% on the Service Group's December 2020 list valuation.
With liabilities equal to two percent of China's gross domestic product, Evergrande has generated fears that its problems could affect the global financial system.
Evergrande's shares have plummeted 80% by then, while its bonds have held steady at troubled levels.
Evergrande faces deadlines for dollar bonus coupon payments totaling $162.38 million in October.