Ailing property developer China Evergrande Group is about to sell just over half of its stake in its real estate division to Hopson Development, also China.
The deal would yield the financially troubled Evergrande converted 4.1 billion pounds. The Chinese state newspaper Global Times reported this after trading in both Evergrande and Hopson shares was halted.
Hopson would like to take a 51 percent stake in Evergrande’s real estate business. A debt of 260 billion euros burdens that group. The threat of Evergrande’s bankruptcy has fascinated investors worldwide for some time. Although Evergrande’s problems, including missing a bond payment deadline two weeks ago, have received scant attention in official Chinese media. The Beijing government has also made a little public comment on the situation.
The potential deal fueled wider concerns about a possible knock-on effect from the problems at Evergrande, as the group is still on the brink of collapse and assets are being sold at rock bottom prices. In addition to China’s real estate sector, the eventual collapse of Evergrande could also affect the broader economy.
Beijing reportedly urged property developers to take over some of Evergrande’s assets. However, Evergrande’s real estate division was still profitable in the first half of this year, and the sale of the business was seen as the easiest way to generate money to pay creditors.