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A woman walks in front of the Hopson compound in Shanghai, China, 05 October 2021. Photo: EPA-EFE

Hopson says it considers agreement to buy Evergrande unit to be ‘legally binding’ despite cancellation

  • An October 1 bid to buy 50.1 per cent of Evergrande Property Services for HK$20.04 billion failed to materialise because Evergrande rescinded the sale
  • Hopson’s latest filing complicates an increasingly messy restructuring saga for Evergrande, the world’s most indebted developer

China Evergrande rival Hopson Development Holdings Limited, which had sought to buy half of the embattled developer’s property management unit, still considers the purchase agreement “legally binding” despite Evergrande rescinding the sale on October 12, according to a company filing with the Hong Kong stock exchange.

“Having sought legal advice, the company considers the agreement legally binding and the acquisition is not subject to the fulfilment of any conditions precedent,” Hopson said in a late filing on Thursday. The filing by Hopson complicates an increasingly messy restructuring saga for Evergrande, the world’s most indebted developer.

An October 1 bid to buy 50.1 per cent of Evergrande Property Services for HK$20.04 billion (US$2.58 billion) failed to materialise because Evergrande rescinded the sale on October 12, according to a Wednesday filing by Hopson. The Shenzhen-based developer, facing US$300 billion in liabilities, is coming up against a 30-day grace period to pay US$83.5 million of coupon payments for an offshore bond, which was missed on September 23.

In its Thursday filing, Hopson said it “has actively taken all necessary actions in a timely manner to prepare for completion of the acquisition, including setting aside funds for part payment of the consideration as required under the agreement.” Evergrande, however, requested Hopson “to make substantial changes to the agreed terms, including among others, the terms of payment of the consideration by paying the consideration to the vendor directly instead.”

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Hopson, in its filing, said this was “unacceptable” and that it was “advised by its financial advisers that such a proposed payment arrangement” was not in its interests.

Evergrande, whose shares resumed trading on the Hong Kong stock exchange on Thursday after being suspended since October 1, has said in two separate filings that the transaction “did not take place” after it terminated the deal because Hopson “had not met the prerequisite” for the purchase, without providing details. Evergrande‘s spokespeople could not be reached for comment on Wednesday.

The purchase deal may have blown up because of a disagreement over the payment of the purchase price, Hopson previously said. Evergrande wanted immediate payment, while Hopson wanted to pay only after completing due diligence to assess the payable accounts and receivables with suppliers, according to a previous statement by Hopson.

Evergrande suffers a second rebuff to its asset disposal plan in a week

Yuexiu Property, a state-owned developer controlled by the Guangdong provincial authorities, dropped its US$1.7 billion bid on October 15 to buy the 26-storey Evergrande Centre office tower on the Wan Chai waterfront because of concerns over its unresolved debt, according to a Reuters report, which cited two unidentified people familiar with the matter.

Evergrande has been trying to sell a variety of assets to help ease its cash crunch and repay suppliers, a process critical to the company’s survival. It has a backlog of 1.3 trillion yuan (US$203 billion) of unfinished properties and has run into difficulty selling uncompleted flats and homes as questions have risen about its financial future.

On the resumption of their trading on Thursday, Evergrande‘s shares fell 12.5 per cent to HK$2.58, while Evergrande Property Services’ shares slumped 8 per cent to HK$4.71. Hopson shares rose 7.58 per cent to HK$26.6.

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