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China Evergrande plans to boost $ 5 billion from property gross sales – International Occasions

© Reuters. FILE PHOTO: The China Evergrande Center building sign can be seen in Hong Kong, China on September 23, 2021. REUTERS / Tyrone Siu

By Tom Westbrook and Donny Kwok

HONG KONG (Reuters) – China Evergrande will sell a controlling stake in its real estate management business for more than $ 5 billion, Chinese media said on Monday, a deal that would be the largest asset sale yet in the debt-laden real estate developer if it goes ahead.

Evergrande, once China's top-selling real estate company, is facing what may be one of the largest restructurings in the country of all time as the company is burdened with roughly $ 305 billion in debt. Uncertainty about the fate of Evergrande has unsettled financial markets, who worry about the potential impact of its problems.

Evergrande said Monday it has filed to suspend trading of its shares in Hong Kong pending an announcement of a major transaction. Evergrande Property Services Group, a spin-off that was publicly listed last year, also moved to halt, saying it was referring to "a possible general offer for shares in the company."

China's state-backed Global Times said Hopson Development has bought a 51 percent stake in the real estate business for more than HK $ 40 billion ($ 5.1 billion), citing other unspecified media reports. Hopson also said it has suspended trading of its shares pending an announcement related to a major acquisition of a Hong Kong-listed company and a possible mandatory offer.

Neither Hopson nor Evergrande responded to inquiries about the Global Times report.

Analysts said the potential deal signals that the company is still working to meet its commitments. But it has also rekindled 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're still trying to raise cash to pay the bills," said OCBC analyst Ezien Hoo. "Looks like the property management unit is by and large the easiest to dispose of."

The reported $ 5 billion proceeds from the sale would theoretically be enough to pay off short-term offshore creditors, with Evergrande facing just over $ 500 million in coupon payments and a $ 2 billion bond by the end of the year March is due.

The price also represents a discount of around 17.5% on the valuation of the listing of the services & # 39; Group from December 2020.

Hopson's shares, valued at HK $ 60.4 billion ($ 7.8 billion), are up 40% so far this year and were rated B + by Fitch in June.

Evergrande's real estate services business, which managed a contractually agreed total area of ​​810 million square meters at the end of June, was also profitable in the first half of 2021, according to the annual financial statements.

NERVOUSNESS

With liabilities amounting to 2% of China's gross domestic product, Evergrande has raised concerns that its problems could spread to the global financial system.

Nervousness subsided after China's central bank promised to protect homebuyers' interests, but the impact on the Chinese economy has kept investors in suspense – especially as signs of hardship spread among Evergrande's colleagues.

The rating agency Fitch lowered the creditworthiness of the real estate developer Fantasia Holdings by four notches on Monday.

Monday's stock trading suspension left the one down about 0.3% against the dollar and weighed on the benchmark index.

Still, potential transaction activity drove shares of Evergrande's electric vehicle division up 29%, but left a shadow on regional stocks and global markets. (MKTS / GLOB)

"It is definitely a positive step in resolving Evergrande's liquidity crisis and we expect more to come," said Gary Ng, Senior Economist Asia Pacific at Natixis.

"But while outsourcing some assets may not be enough, the key for Evergrande is getting project construction going and selling inventory."

Evergrande's stocks are down 80% so far this year while bonds have stayed at distressed levels.

The group announced last month that it had negotiated a settlement with some domestic bondholders and made a repayment of some wealth management products, most of which are held by Chinese retail investors.

The owners of the company's $ 20 billion offshore debt appear further down the line, and bondholders said the interest payments due in the past few weeks have not been paid.

Evergrande faces deadlines in October for coupon payments on dollar bonds totaling $ 162.38 million.

($ 1 = 7.7868 Hong Kong dollars)

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