HONG KONG -- Shares in troubled real estate developer China Evergrande Group and its property management unit Evergrande Property Services were suspended from trading Monday in Hong Kong as investors awaited the next steps in the saga of its debt crisis.
Cailian, a Chinese online news service affiliated with the state-run newspaper Securities Times, said another developer, Hopson Development Holdings, was planning to acquire a majority share in Evergrande Property Services Group.
Hopson's suspended trading of its shares in Hong Kong on Monday. The suspension was “pending the release of announcement(s) in relation to a major transaction of the company under which the company agreed to acquire the shares of a company . . . listed on the stock exchange," it said in a filing.
Hopson’s public relations department said the company would not comment on “market rumors.”
Evergrande Property Services said in its announcement to the Hong Kong exchange that its shares were suspended from trading pending an announcement related to a merger or takeover.
Phone calls to Evergrande's PR office in Hong Kong rang unanswered and the company's offices elsewhere in China were closed for a holiday.
Evergrande has been struggling to avoid defaulting on billions of dollars of debt. The company owes billions to banks, customers and contractors and is facing a cash crunch.
Its situation worsened after the government tightened limits on corporate debt levels.
The company ran up billions of dollars in debt building apartment complexes, malls and office towers over the years.
In August 2020, the government ordered tightened controls on financing for China’s 12 biggest developers, forcing them to reduce corporate debt loads that are seen as a threat to the economy.
Evergrande has been selling off various assets to try to alleviate the problem. Last week, it sold its stake in Shengjing Bank to the state-owned lender based in northeastern China.
The company is one of China’s biggest private sector conglomerates, with more than 200,000 employees, 1,300 projects in 280 cities and assets of 2.3 trillion yuan ($350 billion). It owes creditors some 2 trillion yuan ($310 billion).
Its shares have lost more than 80% of their value this year and ratings agencies say it is at risk of defaulting on its
Like Evergrande, Hopson, based in Guangdong adjacent to Hong Kong, is one of China's biggest property companies. Reports show it has a much lower debt to equity ratio than its largest rivals.
Jitters over a slowdown in China's economy and potential turmoil in its vital property industry have rattled world markets in the past few weeks.
The fear is that a default by Evergrande could cascade throughout the Chinese economy and even world financial markets.
However, economists say that while Beijing can prevent a credit crunch in China it wants to avoid bailing out Evergrande at a time when it is trying to force companies to reduce debt levels.
Hong Kong's benchmark Hang Seng index dropped 2.3% Monday on heavy selling of real estate companies and banks.