(Bloomberg) -- Shares in China Evergrande Group and its property management unit were suspended from trading Monday, Oct 4, as a fresh debt test loomed for the developer underscoring broader risks that have left credit markets on edge.
Hopson Development Holdings Ltd., whose shares were also suspended, plans to acquire a 51% stake in Evergrande Property Services Group Ltd. according to Chinese financial news platform Cailian, citing unidentified people. Cailian amended an earlier report to say the deal would give the unit a valuation of more than HK$40 billion (US$5.1 billion).
See: Asia Pacific sees 7% decline in 1H17 M&A value on tighter Chinese outbound regulations
Uncertainty over the full extent of Evergrande’s debt load, beyond its more than US$300 billion reported in liabilities, has plagued investors since a liquidity crisis at the firm stoked fears of a collapse that could trigger financial and economic contagion. Having already fallen behind on payments to banks, suppliers and holders of onshore investment products, it also hasn’t given any indication that it paid two recent dollar bond coupons.
People familiar with the matter have said that a dollar note maturing Oct. 3 issued at an initial amount of US$260 million by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande. As the maturity is a Sunday (Oct 3), the effective due date is Monday, Oct 4. The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.
Non-payment of the bond principal would constitute a default as the note has no grace period, although five business days would be allowed if failure to pay is down to administrative and technical error, according to the people. Details of the guarantees weren’t broadly known as the note prospectus isn’t publicly available and the deal wasn’t listed on exchanges. Oct 4 is a holiday in China.
Photo: Bloomberg
