Equity trading suspended as debt test looms: Evergrande update

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(Bloomberg) – Shares of China Evergrande Group and its property management unit were suspended on Monday, as a new debt test loomed for the developer, highlighting broader risks that have left credit markets on the wire.

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Hopson Development Holdings Ltd., whose shares were also suspended on Monday, plans to acquire a 51% stake in Evergrande Property Services Group Ltd. for more than HK $ 40 billion ($ 5.1 billion), according to a Cailian report, citing unidentified people. That would value the company more than 40% above Thursday’s closing market cap.

Uncertainty over the full extent of Evergrande’s debt, beyond its more than $ 300 billion in reported liabilities, has plagued investors since a liquidity crunch within the company fueled fears a collapse that could trigger financial and economic contagion.

People familiar with the matter have said that a dollar bill due October 3 issued for an initial amount of $ 260 million by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande. Since the due date is Sunday, the effective due date is Monday. The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.

Failure to pay the principal of the obligation would constitute a default as the note does not have a grace period, although five business days would be allowed if the default is due to an administrative and technical error, according to the people. The details of the guarantees were not widely known as the prospectus of the notes is not publicly available and the deal was not publicly traded. Monday is a public holiday in China.

Key developments:

  • Hopson to buy 51% of Evergrande Mgmt Unit for HK $ 40 billion: Cailian

  • Evergrande, property management unit suspends trading in Hong Kong

  • Nervous markets await outcome of opaque bond tied to Evergrande

  • China steps up efforts to shut down Evergrande, not save it

  • Chinese automaker Sinic faces creditor demanding $ 75 million payment

  • Evergrande’s fear receded too easily: John Authers

  • Evergrande sales in September fall 55% m / m amid crisis, data shows

  • Evergrande woes spread to Sweden with EV unit seeking new owners

  • Evergrande reimburses part of the cash owed to investors in wealth products

Hopson Development Plans Evergrande Property Stake (10:48 a.m.)

Hopson Development plans to acquire a 51% stake in Evergrande Property Services for more than HK $ 40 billion, Cailian reported, citing unidentified people. That would value the company more than 40% above Thursday’s closing market value of HK $ 55.4 billion. The Hong Kong stock exchange was closed for a public holiday on Friday, before trading in Evergrande’s real estate shares and those of its parent company was suspended on Monday.

Evergrande’s 8.25% dollar bond due March 2022 was quoted 0.7 cents per dollar higher at 25.9 cents, according to data compiled by Bloomberg.

Chinese Builder Sinic Faces Creditor Demanding $ 75 Million Payment (10:24 a.m.)

Amid close scrutiny of Chinese real estate companies and fears of Evergrande contagion spilling over to the industry, Sinic Holdings Group Co. received a demand to repay some debts after missing two local interest payments.

Chinese developer’s creditor demands repayment of $ 75.4 million of unpaid principal and accrued interest, after company fails to repay 38.7 million yuan ($ 6 million) of interest on two onshore financing deals on Sept. 18, according to a Hong Kong action. exchange deposit dated September 30.

Trading of shares suspended (9:37 a.m.)

No reason was given for stopping trading in China Evergrande and Evergrande Property Services. Shares of the former have plunged 80% this year, and its bonds have fallen to levels that suggest investors are bracing for default. Evergrande has a market value of HK $ 39.1 billion.

Shares of the developer’s other unit, China Evergrande New Energy Vehicle Group Ltd., have not been suspended. The stock was little changed in Hong Kong trading after falling as low as 8.3% earlier.

Markets Await Clues on Evergrande Bonds (8:35 a.m.)

Any default on Jumbo Fortune’s note payment may also present a risk of cross-default for other Evergrande bonds, according to Bloomberg Intelligence analyst Daniel Fan. Creditors of the Jumbo Note could potentially ask the trustee to declare formal default if they meet a minimum investor threshold, which could prompt holders of other dollar bonds to do the same, he said.

Cross-guarantees have been a problem for China over the past decade with the rise of shadow banking, said Andrew Collier, managing director of Orient Capital Research in Hong Kong. “It is little possible to determine the extent of the problem until there is an explosion in debt and creditors are concerned that they will not be paid.”

China will do all it can to limit the risks (8:28 a.m.)

China has indicated it will do everything in its power to contain Evergrande, while showing little interest in a direct bailout from the developer. This does not bode well for bondholders – both on land and abroad – looking for some sort of rescue from the Chinese government.

Beijing has stepped up efforts to limit the fallout, having dispatched major financial regulators to urge banks to facilitate credit to homebuyers and support the real estate sector. They also bought part of Evergrande’s stake in a troubled bank to limit contagion. In the past 10 days, the central bank has injected 790 billion yuan into the financial system.

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