Evergrande: Company set to update market on ‘major transaction

Chinese property giant Evergrande’s shares have been suspended as investors await a statement about its future.

The crisis at the world’s most indebted property developer has triggered fears that its potential collapse could send shockwaves through global markets.

The firm said the trade halt came ahead of “an announcement containing inside information about a major transaction”.

It comes amid reports that a rival real estate firm is reportedly set to buy a majority stake in an Evergrande unit.

In a regulatory statement to the Hong Kong Stock Exchange, Evergrande Group said that its shares had been suspended from trading “pending the release by the Company of an announcement containing inside information about a major transaction.”

Meanwhile, rival Hong Kong-listed property firm Hopson Development is set to buy a 51% stake in Evergrande Real Estate for around $5bn, according to Chinese news outlet Cailian Press.

Hopson has not yet commented on the report but has suspended trading in its shares, pending an announcement “in relation to a major transaction”.

Evergrande’s problems have rocked markets over concerns about its more than $300bn (£222bn) of debt.

The firm’s shares have fallen by almost 80% since the start of this year.

Hong Kong’s benchmark Hang Seng share index ended Monday’s trading session 2.2% lower.

What has been happening with Evergrande?

In recent weeks Evergrande has struggled to make payments to investors in its bonds and wealth management products.

Last Thursday, the cash-strapped group said that its wealth management business had made a 10% repayment on its products , which are mainly owned by Chinese retail investors,.

That contrasts with reports of overseas bondholders saying the company had failed to make interest payments by the date they were due.

The hugely indebted property giant reportedly missed interest payments to overseas investors last week for the second time in a matter of days. It was due to pay foreign bond holders $47.5m by Wednesday.

But bondholders told Reuters news agency and Bloomberg that they were yet to receive any payment.

Under agreements with investors, the company has a 30-day grace period before the missed payments officially become a default.

Evergrande has interest debt payments of more than $160m due in the next month.

The company has been taking steps in recent weeks to raise money owed to customers, investors and suppliers. Last week, it said it was selling a $1.5bn stake it owned in a commercial bank.

The almost 20% stake in Shengjing Bank was bought by a state-owned asset management company.

Under the agreement, the proceeds of the sale are to be used to pay money Evergrande owes to Shengjing Bank, which is one of the main lenders to the heavily-indebted firm.

The company’s total liabilities are equal to around 2% of China’s gross domestic product.

That has triggered concerns that its problems could spread through the world’s second largest economy and send shockwaves around the global financial system.

Source: BBC


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