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According to the Global Times, Evergrande will raise $5.1 billion through Hopson's sale of a 51% stake to its property service unit.
On Monday, trading in shares of Evergrande as well as Hopson was temporarily halted.
One analyst stated that the $5.1 billion deal proposed would provide critical cashflow in a time when there is need.
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Chinese state media reported Monday that Evergrande will sell its 51% stake in the property management unit to Hopson Development, for $5.1 billion. This was after both companies requested halts to trading.
The Hong Kong Stock Exchange announced Monday that trading in shares of China Evergrande Group stock was temporarily suspended pending the announcement of a "major transaction". The Hong Kong Stock Exchange also stopped trading in Evergrande Property Services Group stock. It stated that the matter covered "a possible general sale of shares of the company."
Evergrande's total liabilities amount to a staggering $305 billion. This is roughly 2% of China’s GDP. Investors are concerned about its importance in China's economic landscape, which has raised concerns about possible contagion to global markets if it falls.
Already, the property developer in trouble has failed to timely make two payments offshore. The property developer faces additional deadlines for US dollar-denominated bond coupons payments of more than $162 Million in October.
Evergrande's stock shares were suspended overnight amid fears of a default on its debt. However, news that it was selling a portion of its portfolio has allayed those concerns, according to Joshua Mahony (senior market analyst at IG).
He stated that the $5.1 billion deal proposed would provide critical cashflow in a time when it was needed, but questions remain about whether these fire-sales are enough to prevent an eventual collapse that has been rumored as the largest default in history.
According to Reuters, Beijing is asking government-owned companies for Evergrande assets to be purchased to avoid a disastrous collapse. The property developer made a deal to sell 20% of a bank commercial for $1.5 billion last week. This signaled that authorities were helping it solve its financial problems. However, these proceeds represent less than 1% its total liabilities.
Evergrande received a $260million offshore interest payment from Jumbo Fortune Enterprises on October 3. Bloomberg reported that the payment has a grace period of five days. The effective due date for the maturity is Monday, as it is Sunday.
Jeffrey Halley, OANDA's senior market analyst, stated in a note that "if no payment is made, then the negative noise surrounding the company and China will increase once more."
Shares in the parent company were at 2.95 Hong Kong Dollars, down 80% from year-to-date. The stock in the property development unit was last traded at 5.12 Hong Kong Dollars, a drop of 53% this year.
Due to an announcement regarding a major acquisition, trading in Hopson was temporarily suspended in Hong Kong. The name of the buyer was not disclosed. Hopson shares, which have a market value in Hong Kong of 60.4 billion Hong Kong dollar ($7.8billion), are up 40% this year. The company saw an increase in profit and its assets are greater than its liabilities during the first half of this year.
Insider reached Evergrande for comment but they didn't respond immediately.
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