Dollar bonds of China Evergrande jumped 3-5 points after it confirmed that it is in talks to sell stakes in two of its units which could inject fresh funds into the developer. The announcement comes a day after Reuters reported that the developer is in discussions with state-owned and private companies to sell stakes in its HK-listed new-energy vehicle and property service units, post which their bonds rose over 3 points. While Evergrande did not confirm the buyers, they said that the discussions involve “several independent third-party investors”, though no concrete agreement was determined.
Caixin’s sources suggest that China Vanke’s property management unit Onewo and COGARD’s property management unit CG Services are among several potential buyers for assets of Evergrande Property Services Group Ltd. Sources also say that SOEs including Shenzhen Talents Housing Group and Shenzhen Investment (owned by Shenzhen SASAC) are in talks with Evergrande on its Shenzhen projects. Evergrande Property Services Group Ltd. is 60% held by Evergrande, with a market value of over $9.6bn, second only to CG Services. Raymond Cheng, property analyst at CIMB Securities says, “It’s positive for Evergrande…We prudently believe that Evergrande bankruptcy risk may not be as high as bond prices suggested”. He added that if the asset sales are realized, their debt-to-equity ratio may fall by 10% to 90%, assuming the ratio has already fallen to 99% after Evergrande said that the ratio dipped below 100% in late June.
Evergrande’s 9.5% 2022s were up over 5 points yesterday to 59.95, and its 7.5% 2023s were up 4.6 to 49.26.
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