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Reuters reported that Evergrande's plan to sell a majority of its property services unit was canceled.
Hopson Development Holdings was the smaller competitor and the deal was valued at $2.6 million.
It is currently paused while both firms wait for the Guangdong provincial government's blessing.
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The deal by Evergrande Group to sell a majority of its property services unit to a smaller competitor has been halted, adding to the precarious situation of the Chinese property developer, Reuters reported Tuesday.
Sources told Reuters that Evergrande was facing more than $300 billion of debt and was looking to sell 51% to Hopson Development Holdings, which would have represented the largest sale ever for the troubled company.
The plan has been halted while both companies wait for the Guangdong province government's blessing. This governs Evergrande’s restructuring. Sources told Reuters that Guangdong has been waiting to approve the deal. However, they also said that some Evergrande's creditors offshore are not happy with it.
Another source said to Reuters that Evergrande is waiting for China's regulatory approval before announcing the deal. The Hong Kong Stock Exchange had already approved the deal.
Evergrande, China's second largest developer of real estate with over 1,300 projects in more than 280 cities, has missed multiple rounds interest payments on international bonds. This initially caused China's bond markets and high-yield debts to slide.
This deal could provide the cash injection its parent company needs to pay lenders and suppliers in advance of another offshore default later in the week.
If Evergrande fails to pay its bond payments within the 30-day grace period, the bond due March 23, 2022 will be declared in default.
China's central bank broke its silence on October 15 amid growing fears of financial contagion. Zou Lan, the head of financial markets at China's People's Bank of China said that the Evergrande crisis' ripple effects are "controllable."
