Shares in one of China’s largest developers, China Evergrande Group, fell 12.5% on the first day of trading resumed, according to data from the Hong Kong Stock Exchange. At 16:20 Moscow time, the price per share amounted to 2.58 Hong Kong dollars, which is 12.54% less than the close of the previous trading session.
Trading in the company’s shares was suspended Oct. 4 ahead of the announcement of the sale of a 50.1% stake in the property management division Property Services Group to Chinese real estate operator Hopson Development for $ 2.6 billion, the company said in a statement. Evergrande said that Hopson was “unable to fulfill the preconditions” of the agreement and therefore the developer decided to terminate the agreement.
China Evergrande Group is on the brink of default. This is evidenced by both the drop in sales – only in August they fell by 13%, and the inability of the company to fulfill its obligations to suppliers and customers. The company announced that it will soon be unable to pay interest to creditors back in September this year, but so far it has been able to carry out an extension. According to The Wall Street Journal, the company’s total debts exceed $ 300 billion.
Bloomberg reported that “any disordered scenario” with Evergrande is a threat to the entire Chinese financial system. “The collapse of Evergrande will be the biggest test that China’s financial system will face in recent years,” Mark Williams, chief economist for Asia at Capital Economics, told the agency.
According to Evergrande, the company has hired a restructuring division of US investment bank Houlihan Lokey Inc. In addition to her, the developer will be advised by Hong Kong-based Admiralty Harbor Capital Ltd. These consultants are hired to help the company resolve problems with creditors and try to restructure debts and delay payments. The situation is further complicated by equity holders. The number of clients who have invested in Evergrande objects, but have not yet received an apartment, according to Bloomberg, is 1.5 million people
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