What’s up: China Evergrande Group dropped talks to sell its property management unit to Hopson Development Holdings Ltd. just weeks after leaking a potential deal that would give the cash-strapped developer a major boost.
In a Wednesday deposit, Evergrande said talks to sell 50.1% of its shares in Evergrande Property Services Group Ltd. for about 20 billion Hong Kong dollars ($2.6 billion) had ended last week. Hopson Development confirmed the end of negotiations in a separate statement, saying it “regrets to announce that the seller has not completed the sale.”
Evergrande said it “has reason to believe – based on information from various sources – that the buyer has not met the precondition to make a general offer of shares in Evergrande Property Services“, and Evergrande has therefore exercised its right of termination.
The two companies have requested the resumption of share trading in Hong Kong, suspended since October 4 pending talks.
Why is this important: Failure of the deal will add more pressure to Evergrande’s struggle to deal with a massive debt crisis that some market observers believe will ripple through the country’s financial system and real estate sector.
With more than $300 billion in debt, the Chinese property development giant is looking for buyers for some of its assets to ease the cash crunch. In August, Evergrande confirmed that he was trying to sell his interests in Evergrande Property Services and China Evergrande New Energy Vehicle Group Ltd., news that has temporarily boosted the share price.
Evergrande is facing interest payment delays on several dollar bonds this week after the end of a 30-day grace period.
Quick Takes are condensed versions of China-related stories for quick news that you can use.
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