China Evergrande Group (HKG:3333) suspended the trading of its shares in the Hong Kong Stock Exchange as the affected real estate developer is preparing a restructuring plan. In a statement, Evergrande did not reveal the reason behind the move.
Q3 2021 hedge fund letters, conferences and more
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
As reported by CNN Business, the trading halt was pending an “announcement containing inside information,” while the eyes of investors are on how the company will be able to repay its debt.
Total liabilities of Evergrande top $300 billion, and its bankruptcy could ensue a property market crisis in China that could send shockwaves throughout the world’s economy, as the Federal Reserve in the U.S. warned last year.
In December, the company failed to pay interest on two offshore bonds and was downgraded to “restricted default” by credit rating agency Fitch Ratings. Last week, the company’s stock went through a rough patch when Evergrande had not shown signs of paying its financial obligations.
Despite the ongoing problems, the developer was able to advance its plans to kickstart construction activities while CEO Hui Ka Yan promised 39,000 properties would be built last month.
Evergrande is being aided by the Chinese regulators, which have raced to the rescue through “steps to contain fallout from the company’s downward spiral,” CNN Business reports. The authorities will also assist Evergrande on a restructuring of its debts and operations, although any bailout move is out of the question.
The almost 40,000 units of properties the company aimed at in December are far above the monthly 10,000 it managed to build between September and November.
According to the BBC, this is not the first time the company suspends shares, as it had done so in October, “saying the move was ahead of ‘an announcement containing inside information about a major transaction.’”
Back then, there were reports about rival real estate firm Hopson Development Holdings Limited (HK:754) acquiring a 51% stake in Evergrande’s property services unit, but the deal worth $2.6 billion did not materialize as both parts were unable to agree on the terms.
At present, the company is carrying out its restructuring plans “behind closed doors” as China is desperate to avoid a Lehman-like crisis that could spread around the global economy.