HONG KONG -- Shares in troubled developer China Evergrande Group and its property management unit were suspended from trading in Hong Kong on Monday ahead of a possible sale of a majority stake in the latter, a move that could shore up the parent company's fast depleting liquidity.
Evergrande's listed electric vehicle unit, also running out of cash, continued to trade, rising 13% on Monday afternoon.
Evergrande shares have lost 80% of their value this year and the company has missed payments to banks, suppliers, bondholders and other investors. It has appointed financial advisers to find solutions to its liquidity squeeze and is looking to sell assets as it attempts to extricate itself from liabilities that exceed $300 billion.
The company in a recent filing said that it has 240 billion yuan ($37.2 billion) in total debts due over the next year, compared with cash and bank deposits of 161.6 billion yuan.
Among the assets it has flagged for sale are shares in Evergrande Property Services, which boasts stronger financials than its parent.
Evergrande Property reported a 68.6% rise in net profit in the first half of 2021 from a year earlier, while also posting a rise in area under management and cash on hand. Its shares have declined 40% this year though, dragged down by the struggles of its parent.
Evergrande Group owned 61% of the property services unit as of May 18, according to Capital IQ data.
More than 15 other stocks were also suspended from trade Monday morning in Hong Kong, including fellow Chinese property company Hopson Development Holding, which said it would be announcing the acquisition of shares in another company listed in the city.
Some Chinese local media reported that Hopson had agreed to buy 51% of Evergrande Property. In a midday update, Evergrande said its share suspension was "pending the release by the company of an announcement containing inside information about a major transaction."
Evergrande Property added that the coming announcement related to a merger or takeover involving a possible general offer for its shares.
Last week, Evergrande reached a deal to sell a 19.9% stake in regional lender Shengjing Bank for $1.5 billion to a state-owned company, but the bank has demanded that all the proceeds be set off against sums the developer owes it.
Evergrande warned last month that it could default if it failed to attract new investors or sell enough assets. It missed coupon payments on two offshore dollar bonds but has 30 days to make good on those debts.
Bloomberg reported on Monday that a $260 million bond guaranteed by Evergrande had matured without repayment a day earlier. The note was issued by Jumbo Fortune Enterprises, a joint venture involving Hengda Real Estate, Evergrande's domestic property arm.
Last week, Evergrande canceled plans to list its EV unit in Shanghai. It has been offering apartments, parking lots and commercial space to suppliers and other creditors to settle debts but has noted that condominium sales are falling amid consumer worries about its fate.
Some longtime backers of Evergrande, such as Hong Kong developer Chinese Estates and its leaders, have also been deserting the company. Last month, Chinese Estates, the second-largest shareholder in Evergrande, flagged plans to exit its entire shareholding.
Authorities have asked banks to support the property sector and flooded the market with liquidity to contain the fallout. Evergrande has not received direct support as yet.