Wrapup 1: Key Evergrande deal to sell stake in unit put on hold - sources

Modern Land (China)

19/10/2021 12:45

* Deal to sell 51% in property services unit put on hold
-sources
    * Evergrande paid onshore bond coupon due Tue - sources 
    * Sunac made $27.14 mln offshore coupon payment -source

    By Clare Jim, Julie Zhu and Samuel Shen
    HONG KONG/SHANGHAI, Oct 19 (Reuters) - China Evergrande
Group's  3333.HK  deal to sell a 51% stake in its property
services unit has been put on hold, two people with knowledge of
the matter said, in a blow to the embattled developer's hopes of
avoiding a potentially disruptive default.
    Evergrande, teetering on the brink of collapse with more
than $300 billion in debt, was in talks to sell the stake in
Evergrande Property Services  6666.HK  to smaller rival Hopson
Development Holdings  0754.HK  for around HK$20 billion ($2.6
billion), sources previously told Reuters.
    However, the deal, which was set to be the biggest asset
sale for the company, has been put on hold as it has yet to win
the blessing of the Guangdong provincial government, which is
overseeing Evergrande's restructuring, one of the people said on
Tuesday. 
    When contacted, a Hopson representative asked Reuters to
await an announcement. Evergrande and the Guangdong provincial
government did not immediately respond to Reuters requests for
comment. 
    Evergrande is scrambling to raise funds to pay its many
lenders and suppliers, amid concerns about a possible offshore
default later this week after it missed a series of interest
payments due on its bonds.    
    However, Hengda Real Estate Group Co, Evergrande's flagship
unit, has remitted funds to pay an onshore bond coupon of 121.8
million yuan ($19 million) due on Tuesday, four people with
knowledge of the matter said.
    One of the people said Evergrande, China's No. 2 developer, 
needs to prioritise its limited funds towards the domestic
market where the stakes are much higher for the country's
financial system.
    While, it was not immediately clear why the Guangdong
provincial government has not approved the Evergrande Property
Services transaction, some of Evergrande's offshore creditors
had also opposed the deal, the person added.
    Another source said the announcement of the deal will be
delayed, pending China's regulatory approval. The deal has
already won Hong Kong Stock Exchange's special approval, he
added.
    Reuters reported last week Chinese state-owned Yuexiu
Property  0123.HK  had pulled out of a proposed $1.7 billion
deal to buy Evergrande's Hong Kong headquarters building over
worries about the developer's dire financial situation. 
    A source said the company had also received guidance from
the municipal government of the southern city of Guangzhou to
put the purchase on hold at the end of August.  urn:newsml:reuters.com:*:nL1N2RB0LD
    
    
    MARKETS ROILED
    The liquidity crisis at Evergrande has roiled global
markets. High-yield bonds issued by Chinese property developers
have been hit especially hard.
    An Evergrande bond due March 23, 2022 will officially be in
default if the company does not make good after a 30-day grace
period for a missed coupon payment that had been due on Sept.
23.
    But the wider offshore bond market has responded positively
after assuring comments from China central bank's and coupon
payments by two other major developers.
    An index of China high-yield debt  .MERACYC , which is
dominated by property developer issuers, has seen spreads
tighten from last week's record levels to around 1,484 points on
Tuesday.
    Sunac China  1918.HK , which has a $27.14 million payment
due Tuesday, has paid its bondholders, a source with direct
knowledge of the matter said. 
    The source was not authorised to speak to media and declined
to be identified. A Sunac representative declined to comment.
    Kaisa Group  1638.HK  said on Monday it had paid a coupon
due Oct. 16 and it plans to transfer funds for a coupon worth
$35.85 million due Oct. 22 on Thursday.  urn:newsml:reuters.com:*:nL4N2RE1KL
    In the past few days, the People's Bank of China has said
spillover effects on the banking system from Evergrande's debt
problems were controllable and that China's economy was "doing
well".
    Bonds from Chinese developers that gained on Tuesday
included Modern Land's 2022 bonds  BS211067586=  which bounced
over 8% to 40.250 cents on the dollar, while Central China Real
Estate's 2024 bonds  VG226203036=  climbed over 5% to 44.843
cents.
    On Monday, smaller developer Sinic Holdings  2103.HK 
defaulted on $246 million in bonds as expected. It had warned of
the default last week, saying it did not have sufficient 
financial resources.  urn:newsml:reuters.com:*:nL1N2R70S9

 (Reporting by Clare Jim in Hong Kong, Samuel Shen in Shanghai,
Shanghai newsroom and Beijing newsroom; Editing by Edwina Gibbs,
Lincoln Feast, Kirsten Donovan)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))