China Evergrande Group is Trying to Avoid Bankruptcy
The world’s most indebted property developer China Evergrande Group is set to sell part of its stake in its property services unit. The property giant is trying to raise cash in order to avoid the worst-case scenario.
Trading in shares of Evergrande as well as Evergrande Property Services was halted on Monday morning. Interestingly, in a filing with the Hong Kong exchange, one of the major property developers said it requested the trading halt ahead of an announcement about a “major transaction”.
Meanwhile, Chinese developer Hopson also suspended trading of its shares, citing an impending announcement of a “major transaction” to buy the shares of a Hong Kong-listed company. China Evergrande Group will sell about 51% of its property services arm to Hopson according to Global Times. Hopson plans to acquire about 51% of Evergrande Property Services for more than $5 billion.
China Evergrande Group and its financial problems
One of the country’s most famous property developers is on the verge of default. After expanding rapidly over the years as well as buying assets as the country’s economy boomed, the property giant is now snowed under a debt of $300 billion.
China Evergrande Group is so huge that the fallout from a potential failure could affect the global economy. The company owns more than 1,300 real estate projects across the country. It has 200,000 employees. Nonetheless, it indirectly creates more than 3.8 million jobs every year, according to its website. It has seven units dabbing in a wide range of industries, including electric vehicles, consumer products, health-care services, etc. The property giant even has a theme park.
Its debt stocked investor concern as China Evergrande Group warned twice it could default, rolling markets. The company also warned its escalating troubles could also lead to broader default risks. Unfortunately, it also missed interest payments on two offshore bonds in recent weeks, leaving overseas investors in limbo.
China Evergrande Group is trying to improve the situation by selling stakes in other assets. For instance, it sold property units to suppliers and contractors to offset some of its outstanding payments.
At the end of September, China Evergrande Group made an important announcement. It decided to sell a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm. The state-owned Shenyang Shengjing Finance Investment Group will help to solve the problems of Shengjing Bank.
- Trading Instrument
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. If you are interested in following the latest news on the topic, please follow Finance Brokerage on Google News.