China property sector error amid Evergrande anxiety
On Tuesday, increasing concerns about failures at Chinese property developers weakened investor sentiment. The fresh credit rating started to decline while uncertainty about the future of China’s Evergrande is the main issue. It scrambled earlier to boost cash by selling assets.
Evergrande encounters one of China’s largest-ever debt restructurings as it has more than $350 billion of debt. In September, the company missed making coupon payments.
The possible failure and destruction of one of China’s largest borrowers are triggering concerns about transmittal risks to the property sector in China, which is second in the world by its economy.
On Monday, Evergrande asked for a pause in trading its shares while waiting for an announcement about a primary deal. Evergrande Property Services Group also demanded a delay referring to a potential general offer for company divisions and shares.
Global Times (backed by China) said that Hopson Development bought a 52% stake in the property business, which is more than HK$45 billion, equal to $5.2 billion. However, this information came from unspecified media reports.
Evergrande refused to comment before an official announcement. Besides its silence, trading in the company’s shares continued to be suspended until Tuesday.
While investors expected approval of the deal, Sinic Holdings (a Chinese developer) became the latest company to suffer from a decline of its rating as stocks in the sector seemed under pressure.
Evergrande might get around $5 billion from the stated unit stake, while its sales might cover offshore bond payments. It has a 2-billion dollar bond with $550 million in bond coupons.
Analysts say that Evergrande presents its potential deal might mean that the company still tries to meet its obligations. In a statement, the Chinese property developer, homebuilder Fantasia Holdings, said it would evaluate the potential influence of the non-payment on the company’s financial circumstances.
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