Evergrande shares plummet after collapse of rescue package stake sale worth $2.6bn

Shares of China Evergrande Group slid as much as 14 per cent on Thursday after a deal to sell a $2.6 billion stake in its property services unit fell through, in the latest blow to the developer whose massive debt woes have rattled global markets.

Evergrande said it had scrapped a deal to sell a 50.1 per cent stake in Evergrande Property Services to Hopson Development as the smaller rival had not met the “prerequisite to make a general offer”.

Both sides appeared to trade blame for the setback, with Hopson saying it does not accept “there is any substance whatsoever” to Evergrande’s termination of the agreement, and it is exploring options to protect its legitimate interests.

The deal is the developer’s second to collapse amid its scramble to raise cash in recent weeks. Two sources said last week the $1.7bn sale of its Hong Kong headquarters had failed amid buyer worries over Evergrande’s dire situation.

The latest setback also comes just ahead of the expiry of a 30day grace period for Evergrande to pay $83.5 million in coupon payments for an offshore bond, at which time China’s most indebted developer would be considered in default.

In an exchange filing, Evergrande said the grace periods for the payment of the interest on its US dollar-denominated bonds that had become due in September and October had not expired. “The scrapped transaction has made it even more unlikely for it [Evergrande] to pull a rabbit out of a hat at the last minute,” said a lawyer representing some creditors, requesting anonymity.

“Given where things are with the missed payments and the grace period running out soon, people are bracing for a hard default. We’ll see how the company addresses this in its negotiations with creditors.”

Trading in the Hong Kong-listed shares of China Evergrande, its property services unit and Hopson all resumed on Thursday after a more than two-week suspension. Evergrande trimmed opening losses and was down 9.8 per cent in early trade. Its property services unit dropped 5 per cent, while its electric vehicle arm plunged as much as 10.3 per cent. Shares of Hopson rose 5.6 per cent.

Mainland China’s property index gained nearly 2 per cent.