Shares of China Evergrande were halted on Hong Kong’s stock exchange on Monday pending a deal, as doubts swirled over whether the struggling property giant would be able to meet its immense financial obligations.
Evergrande said in a filing that its shares were halted ahead of an announcement about a “major transaction.” It gave no additional details.
The real estate developer — once China’s most prolific — has been under close watch by foreign investors and local regulators after it missed two important interest payments on U.S. dollar bonds. The missed payments may not necessarily trigger a default because they each have a 30-day grace period before the missing payment would be considered a default.
Evergrande is under pressure from contractors and employees who are owed more than $300 billion in unpaid bills, as well as home buyers who are waiting on as many as 1.6 million unfinished apartments. In recent days, Wall Street banks and financial sleuths have been uncovering other liabilities that Evergrande may have in the form of guarantees that may add to its towering debt pile.
The company has not addressed its missed bond payments but said last week that it had sold a stake in a Chinese bank for $1.5 billion, which would go to pay some of its debts. Investors who are owed payments said they had not heard anything from the company, either.
Many of them have become increasingly pessimistic of a scenario where Beijing would step in to save Evergrande. It has hired restructuring experts to “explore all feasible options” for its future.
“I don’t expect payments will be made because the group has to be restructured,” said Michel Löwy, chief executive of SC Lowy, an investment firm that has a position in Evergrande bonds.
“I think it’s going to be a major hit for bondholders,” said Mr. Löwy, who said he was much more negative about the situation as more information has emerged about the quality of the land that Evergrande owns but has yet to develop. A restructuring of the entire sprawling real estate empire “would be very difficult to monetize,” he said.