Evergrande ally Chinese Estates plans to delist in Hong Kong after stock plunge

The Hong Kong Developer had seen their stocks sink as much as 44% this year to its lowest level in nearly two decades as Evergrande teetered on the brink of collapse. Chinese estates is Evergrande’s second largest shareholder after the founder and president Xu Jiayin.
“Directors are cautious and concerned about the recent development of China Evergrande Group, including certain disclosures made by China Evergrande Group about its liquidity,” Chinese Estates said in a presentation to the stock exchange Wednesday night.

It offered to pay minority shareholders 1.91 billion Hong Kong dollars ($ 245 million) for their 25% stake and take the company private. The offer represented a premium of around 83% over the share’s closing price on September 28, the last full day before trading was suspended.

Chinese Estates Holdings, controlled by Hong Kong billionaire Joseph Lau and his wife Chan Hoi-wan, has been an Evergrande ally for a long time. It has often offered financial support to the Chinese developer by underwriting many of its bond or stock sales since 2009, when Evergrande was listed in Hong Kong. He has also worked with Evergrande on real estate projects in mainland China.
At the end of last year, Evergrande’s stock and bond holdings accounted for more than a third of Chinese Estates’ total assets, according to the company. annual report. As Evergrande’s stock fell amidst a growing debt crisis, Chinese Estates Holdings incurred huge losses on its investment.
On September 23, Chinese Estates Holdings said had sold $ 32 million in Evergrande stock in the past three weeks. He also plans to ditch his remaining stake. The company expects its total loss from the divestitures to be HK $ 10.4 billion ($ 1.3 billion).

Moving to the private sector can give a company more flexibility to think long-term and meet strategic objectives, rather than being swayed by short-term market expectations. Shares of Chinese Estates Holdings rose 32% on Thursday in Hong Kong as trading resumed following the announcement of the offering. They had been suspended since the morning of September 29.

The Evergrande debt crisis has unsettled global investors in recent weeks, raising concerns about a possible ripple effect on the Chinese economy and financial markets in general. Earlier this week, another Chinese developer, Fantasia Holdings, defaulted on its debt, as smaller players grapple with rising bond yields, funding runs out, and property buyers grow more cautious.

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Tension in China’s real estate sector has risen since August 2020, when Beijing curbed developer over-indebtedness to prevent the market from overheating.

Earlier this year, the Chinese government made it clear that it would prioritize “common prosperity” in its political goals and control runaway home prices, which it has blamed for worsening income inequality and threatening economic stability. And social.

Evergrande’s liquidity crisis has intensified in recent months. The company warned investors about its cash flow crisis in September, saying it could default if it couldn’t raise money quickly. In recent weeks, he missed at least two bond interest payments.

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