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Shares Dive on Developer’s Failed Stake Sale: Evergrande Update

High-rise apartment buildings at China Evergrande Group's under-construction Riverside Palace development in Taicang, Jiangsu province, China, on Friday, Sept. 24, 2021. China's housing regulator has stepped up oversight of China Evergrande Group's bank accounts to ensure funds are used to complete housing projects and not diverted to pay creditors. Photographer: Qilai Shen/Bloomberg
By Bloomberg
21 Oct 2021 0

China Evergrande Group’s shares fell as much as 13.6% after the cash-strapped developer ended discussions to sell a stake in its property-management arm, a deal that would have given it a major infusion of liquidity.

The shares offer “no value” without the sale, said Justin Tang, head of Asian research at United First Partners in Singapore. Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, said he expects stock of Evergrande and its property-management unit to drop “at least some 15-20% today.”

Trading in Evergrande, Hopson Development Holdings Ltd. and Evergrande Property Services Group Ltd. had been suspended since the start of the month pending an announcement of a major transaction. Evergrande’s shares had swung wildly before the halt, tumbling about 80% this year. On Thursday, it was trading 10.5% lower as of 10:48 a.m. in Hong Kong.

Evergrande ended talks last week to sell 50.1% of its stock in Evergrande Property Services for about HK$20 billion ($2.6 billion). The developer disclosed the latest developments in a filing with the Hong Kong stock exchange Wednesday. The potential acquirer, Hopson Development, said in its own statement that it “regrets to announce that the vendor has failed to complete the sale” of the Evergrande Property Services stake, and asked for its shares to also resume trading.

 

Evergrande share prices resume decline as sale talk ends

Key Developments:

Analysts See Evergrande Share Price Plunging Further (9:20 a.m. HK)

Evergrande’s shares offer “no value” for investors “without the infusion of cash from the sale” of assets, said United First Partners’ Tang, adding that the share price “is going to take the elevator down,” he added. The property developer’s financials have “deteriorated further” and it’s unlikely to pay its debts on time, Cheng at CGS-CIMB Securities wrote in an email.

Modern Land China Halted in Hong Kong (9:15 a.m. HK)

Shares of Modern Land (China) Co. Ltd. have been suspended from 9 a.m. local time pending the release of an inside information announcement, according to a Hong Kong stock exchange filing. Late Wednesday, the developer said it continues to experience liquidity issues and won’t seek permission from debt holders to delay repayment of a $250 million bond. The company said it’s in discussions with prospective independent financial advisers “with a view to achieving a feasible solution to its current liquidity issues.”

Evergrande’s Failed Stake Sale Amounts to a Harsh Setback (9:15 a.m. HK)

Evergrande’s liquidity crisis could further intensify in the short-term now that its attempt to sell the majority stake of Evergrande Property Services to Hopson Development has fallen through, Bloomberg Intelligence analysts Kristy Hung and Patrick Wong wrote in a note. The fire-sale deal would have amounted to HK$3.70 a share, or 28% below its Sept. 30 close, a sign that potential buyers may demand even deeper discounts to acquire the distressed developer’s assets. Evergrande’s 3.65 billion yuan ($571 million) in contracted sales since September amounts to a 90% plunge from August.

Chinese Estates Sells Kaisa Group Notes at Loss (8:20 a.m. HK)

Chinese Estates Holdings Ltd., controlled by a long-time backer of Evergrande, sold senior notes of Kaisa Group at a HK$225.9 million loss, the company said in a stock-exchange filing. The transaction provides immediate liquidity and allows it to re-allocate proceeds for other reinvestment opportunities, it said.

Evergrande deadlines:

Dollar bonds Coupon due date Amount

(million dollars)

EVERRE 8.25% due 2022 Sept. 23 83.53
EVERRE 9.5% due 2024 Sept. 29 45.17
EVERRE 9.5% due 2022 Oct. 11 68.88
EVERRE 10% due 2023 Oct. 11 42.5
EVERRE 10.5% due 2024 Oct. 11 36.75
TIANHL 13% due 2022 Nov. 6 41.93
TIANHL 13.75% due 2023 Nov. 6 40.56

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