PricewaterhouseCoopers (PwC) auditor of Chinese developer Hopson Development Holdings resigned on Friday, January 28th.
According to Bloomberg, Hopson said the auditor left because the company failed to provide enough documents such as those on its “accounting treatment of certain of the Group’s equity investments and property projects and the valuation of the Group’s investment properties.”
Hopson Development, purportedly among those isolated from China’s real estate crisis, had its dollar bonds plunged 9.1 cents to 83.1 cents after PwC auditor quitted, setting a new low. Its dollar bond was teetering at face value just last month.
The company’s stocks also dropped as far as 31% before reversing course and closing at a loss of 17%.
Bloomberg reported that Hopson Development and its subsidiaries have HK$880 million (113 million USD) in offshore bonds yet to be redeemed, including a bond due in July for HK$720 million ($92.4 million).
Besides PwC, other real estates in debt also changed their audit units, with worries mounting that a trend of resignations among auditors was looming.
Deloitte Touche Tohmatsu Ltd departed as an auditor for China Aoyuan Group earlier this week due to a failure in discussing the audit fee. The developer said part of that was related to further processes of the firm’s finances.
The onshore arm of property developer Shimao Group Holdings also recently said that it would replace auditors for the first time in 27 years.
Credit traders said the value of China’s high-yield dollar bonds has decreased by at least 3 cents per dollar. In addition, on January 28th, a Bloomberg Intelligence index of Chinese real estate developers saw a fall of 2.2%, putting it on track to the worst week since November.
Bloomberg Intelligence analyst Andrew Chan said, “PricewaterhouseCoopers (PwC) ‘s sudden resignation as the auditor of Hopson, a relatively strong China property developer, could kickstart the mass resignation of other auditors.”
The firm’s grounds for leaving “may have major consequences for the Chinese property sector,” Chan warned, warning that any same decisions might increase the possibility of reporting delays as well as heighten equities and bond price fluctuations.