Evergrande's woes pile up as suitors flee

China Vanke (2202) and Country Garden (2007) are walking away from a deal to acquire the property management business of China Evergrande (3333), mainland media reported yesterday.

Investors are also worried about Evergrande's liquidity issues, as it halted two property projects in Kunming after delaying pay for workers.

Shares of the subsidiary Evergrande Property Services (6666) closed 6.16 percent lower at HK$6.85 yesterday.

Debt-laden Evergrande (3333) slumped 8.21 percent to HK$5.81, ending three days of gains.

On Tuesday night, Evergande announced that it is in talks with several independent third-party investors to sell a part of the interests in the listed subsidiaries China Evergrande New Energy Vehicle (0708) and Evergrande Property Services.

However, Evergrande and its two major peers - China Vanke and Country Garden - failed to reach an agreement due to price and other issues, mainland media reported yesterday. Shenzhen Metro Group and China Jinmao (0817) are among the potential buyers.

Evergrande plans to sell about 120 billion yuan (HK$144.16 billion) in assets and initiated talks with potential buyers in early June, REDD reported earlier. It is also seeking buyers for the bulk of its urban renewal projects in Shenzhen, Reuters reported earlier.

Evergrande's complex web of liabilities - including bank loans, bonds and down payments from home-buyers - swelled to 1.95 trillion yuan at the end of last year, about 77 percent of which was due within 12 months, said its annual report. Bank loans and other borrowings from firms including trusts accounted for about 81 percent of the developer's 335.5 billion yuan of interest-bearing debt coming due in 2021.

Meanwhile, at least three major creditors to Evergrande, China Minsheng Banking (1988), China Zheshang Bank (2016) and Shanghai Pudong Development Bank, have given it more time to repay maturing loans, say people familiar with the matter, offering some relief for the cash-strapped developer as it fends off a string of demands for unpaid dues, Bloomberg reported yesterday.

The problems prompted Beijing to instruct authorities in Evergrande's home province of Guangdong to map out a plan to manage the developer's pile of debt, said people in the know.

The local government has set up a team to handle the issue and is coordinating with banks, other creditors and potential buyers of Evergrande's assets, according to reports.