BEIJING, October 20 (TMTPOST)— Evergrande failed to sell a majority of stakes in its property management unit, a major blow to the embattled Chinese property developer which has been struggling to avoid debt default and was reported to offload stakes in property service and electric vehicle units to raise funds back in August.

Source: Visual China

In a filing with the Hong Kong exchange on Wednesday, Evergrande announced it decided to terminate the agreement of shares transfer about its unit Evergrande Property Services on October 13 as it reasonably concluded that the transferee—another Hong Kong-listed developer Hopson Development Holdings hasn’t met pre-conditions of the transaction, based on information it obtained on the previous day from any other third party but the Securities and Futures Commission of Hong Kong. According to the agreement, Evergrande is supposed to sell about 51% of its arm to Hopson for HK$20.04 billion, or almost U$2.6 billion. As the transaction is cancelled, trading in shares of Evergrande and Evergrande Property Services would be resumed from 9:00 a.m. Hong Kong time October 21.

However, Hopson showed disagreement with Evergrande in its statement later, claiming that it could not accept changes in the payment provisions Evergrande offered after the transfer contract was signed off and has refuted any accusation Evergrande blamed for termination. Under the contract, Hopson, the buyer, shall not pay Evergrande for shares of its arm, namely the target company, until it pays off the seller-guarantor and its affiliates’ receivables. And Hopson could not accept the request for directly payment for Evergrande, as it hasn’t completed the due diligence and it’s difficult to ensure the target company to receive all the payment for the seller-guarantor and its affiliates’ receivables.

Hopson highlighted that it was ready for completion of shares acquisition but had to abandon the effort since it’s very hard to determine whether the deal can be concluded as the pair previously agreed when Evergrande unilaterally terminated the contract. Hopson also signaled it may claim compensation for contract dismissal as the party in breach shall pay the non-breaching party liquidated damages amounting to HK$1 billion under the contract, when the non-breaching party terminated the contract for failure to finish the execution resulting from another party’s breach.