Evergrande shares suspended in Hong Kong amid acquisition rumours

Trading halt has intensified speculation of a potential acquisition in the company’s property management unit

Stuti Mishra
Monday 04 October 2021 19:00
comments

Related: Evergrande Misses Payment

Trading in shares of China’s troubled real estate giant Evergrande was suspended on the Hong Kong Stock Exchange (HKEX) on Monday, as the world’s most indebted developer missed back-to-back interest payment deadlines and continues its attempts to pay off investors.

“Trading in the shares of China Evergrande Group will be halted at 9am today,” a regulatory filing with HKEX said, without stating a reason. “Accordingly, all structured products relating to the company will also be halted from trading at the same time.”

HKEX did not specify the reasons behind the halt or who initiated the suspension. However, it has intensified speculation over a potential acquisition in the company’s property management unit, as the cash-strapped company has been making attempts to raise money to meet its dues.

Cailian, a Chinese online news service affiliated with the state-run newspaper Securities Times, said another developer, Hopson Development Holdings, was planning to acquire a majority share in Evergrande Property Services Group.

Trading in Hopson’s shares was also suspended on Monday in Hong Kong, “pending the release of announcement(s) in relation to a major transaction of the company under which the company agreed to acquire the shares of a company... listed on the stock exchange,” it said in a filing.

It is not clear yet whether Hopson’s acquisition announcement relates to Evergrande. However, Reuters has reported that the Chinese government – which has so far steered clear of helping one of the country’s most important developers with a bailout – is hoping that asset purchases can be a way out for the company.

As China’s second biggest developer, Evergrande is often said to be “too big” for the country to let it collapse. However, with a debt of $300bn (£221bn), the company is embroiled in a major crisis, missing interest payment dates and seeing its stock value tumble over 80 per cent in the last year.

The hugely indebted property giant missed another interest payment for an offshore bond last week, a second default in the same month. It was due to pay foreign bond holders $47.5m (£35m) by Wednesday.

However, the company provided some relief to stock market investors who are fearing the domino effect of Evergrande’s collapse on Chinese and global markets, when it settled payment of one domestic bond earlier and sold a $1.5bn stake in a regional Chinese bank last week.

“Looks like the property management unit is the easiest to dispose [of] in the grand scheme of things, indicative of the company trying to generate near-term cash,” OCBC analyst Ezien Hoo told Reuters.

“I’m not sure this necessarily means that the company has given up on surviving, especially as selling an asset means they are still trying to raise cash to pay the bills.”

According to Reuters, the push from the authorities has worked and a handful of government-owned enterprises have already done due diligence on Evergrande’s assets in the southern Chinese city Guangzhou.

Potential buyers of Evergrande’s core assets in Guangzhou have been “arranged” with “both political and commercial considerations” in mind, Reuters quoted a source as saying, adding that authorities don’t want to see just a few companies bidding for the same assets.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments