Can collapse still be averted ?: Partial sale should give Evergrande some air

Can collapse still be averted?
Partial sales should give Evergrande some air

On the global stock exchanges, there is great concern that real estate giant Evergrande will go bankrupt: In Hong Kong, trading has even been suspended. According to media reports, the ailing group is about to sell its shares. Analysts also warn of social consequences in the event of bankruptcy.

According to media reports, the ailing real estate giant China Evergrande is on the verge of a billion-dollar stake sale. The group plans to sell 51 percent of its property management subsidiary Evergrande Property Services Group to competitor Hopson Development for more than five billion dollars, as reported by the Chinese state newspaper “Global Times” and other newspapers. Hopson and Evergrande did not comment on this.

However, their shares were suspended from trading on the grounds that a major transaction was announced. Evergrande would give itself some breathing space with the sale of the stake. The second largest real estate developer in China is groaning under a mountain of debt of more than $ 300 billion and is in arrears with creditors, suppliers and customers. In the past few days, Evergrande has already missed deadlines for the payment of bond interest several times. Another $ 162 million in interest is due in October.

Investors worry that a collapse of Evergrande will have far-reaching consequences for the financial system and other industries. Many therefore hope for government support. The government in Beijing asked state companies last week to take over parts of Evergrande, Reuters reported, citing insiders.

“Government still has little insight”

China Evergrande , 31

The sale of shares in the property management subsidiary is an important step to contain Evergrande’s liquidity crisis, said economist Gary Ng of Bank Natixis. “We expect more of this to come.” Evergrande is now apparently trying to get cash to pay bills, said analyst Ezien Hoo from broker OCBC. “It looks like the real estate management unit is still the easiest to dispose of.”

The shareholders of the Evergrande subsidiary for electromobility were also hoping for a possible new partial owner. Their shares shot up 29 percent. However, concerns about a collapse of the real estate giant were once again on the global stock exchanges. Equity markets in Hong Kong and Japan fell, the Dax was under pressure and a weaker opening appeared in the US. “The Chinese government still has little insight into the fate of Evergrande, although a slow and steady breakdown of the company seems to be the preferred route at the moment,” said market analyst Jeffrey Halley of online Borker Oanda.

Evergrande employs around 200,000 people

At the latest with the suspension of trading in Evergrande’s shares, worries about a collapse had become present again, said Jochen Stanzl, market analyst at CMC Markets. Evergrande’s shares have lost more than 80 percent since the beginning of the year. The group still comes to a market value of five billion.

Analysts also warn of social consequences in the event of bankruptcy. Evergrande employs around 200,000 people and hires several million people annually for construction projects. In August, numerous investors stormed the headquarters of the group and demanded their invested money back.

.
source site