SINGAPORE— China Evergrande Group EGRNF 1.39% called off plans to sell a majority stake in its property-management unit for the equivalent of $2.6 billion, a major setback in the real-estate giant’s attempts to ease its liquidity crunch.
The cash-strapped developer said Wednesday that it had planned to sell 50.1% of the profitable subsidiary, Evergrande Property Services Group Ltd. 6666 -8.01% , to a unit of rival developer Hopson Development Holdings Ltd.
The agreement was struck on Oct. 1 and was to be completed by Oct. 12. It was terminated by Evergrande, which said in a regulatory filing that it “had reason to believe…that the purchaser had not met the prerequisite to make a general offer for shares in Evergrande Property Services.” The business is listed in Hong Kong, and securities regulations in the city require a buyer of 30% or more of a public company to make a takeover offer to all its shareholders.
Hopson, in a separate filing Wednesday, rebutted Evergrande’s version of events. It said it had been ready to buy the stake but the other parties to the deal had made unacceptable requests to change the terms. It said that included a demand that Hopson send all the funds directly to Evergrande, rather than first depositing the payment with the property management unit, as the agreement had stated.
“The company is exploring the options available to it for the protection of its legitimate interests,” Hopson added.
Evergrande, China’s most indebted developer, said it hasn’t made much progress unloading its assets, aside from a $1.55 billion deal last month to sell most of its stake in a Chinese commercial bank.
Sales of its apartments, which tumbled over the summer, fell even more sharply in recent weeks, as the company’s widely publicized financial troubles spooked home buyers.
Evergrande said its contracted sales “for the month of September 2021 and up till now” totaled the equivalent of just $572 million, a far cry from the $28.5 billion worth of contracted sales it reported in the full two months of September and October 2020. The recent total includes apartment units that Evergrande handed to suppliers and contractors that it owed money to.
The Shenzhen-headquartered developer warned again that it may not be able to meet its financial obligations and repay its debt. Evergrande reported the equivalent of more than $300 billion in liabilities at the end of June, which include close to $20 billion in outstanding U.S. dollar bonds.
On Sept. 23, Evergrande didn’t make $83.5 million in interest payments that were due on $2.03 billion of its dollar bonds, and it has since skipped other bond coupon payments.
The company on Wednesday made its first public comments directly addressing the bond payments.
Evergrande noted that it is still within 30-day grace periods for those interest payments, but didn’t say if it intended to make them. The group will “use its best effort to negotiate for the renewal or extension of its borrowings or other alternative arrangements with its creditors,” it said.
Shares in Evergrande, its subsidiary and Hopson, which have all been suspended since Oct. 4, resumed trading Thursday.
Evergrande stock dropped 9.5% by mid-morning in Hong Kong, to HK$2.67 per share, while Evergrande Property Services fell 5.7% to HK$4.83. Hopson shares rose more than 5%.
Evergrande Property Services last closed at HK$5.12 per share, and Hopson’s planned purchase price had been 28% lower, at HK$3.70 per share.
Write to Serena Ng at [email protected]
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