China Evergrande Group's stock dropped as much as 14% on Thursday after a proposal to sell a $2.6 billion stake in its property services unit fell through, the latest blow to the developer's enormous financial difficulties, which have roiled global markets.

Evergrande announced that a contract to sell a 50.1 percent share in Evergrande Property Services Group Ltd to Hopson Development Holdings Ltd had been terminated because the smaller rival had failed to meet the "prerequisite to make a general offer."

Both sides appeared to blame each other for the failure, with Hopson claiming that Evergrande's termination of the sales agreement has "no substance whatsoever" and that it is examining measures to preserve its legal interests.

The agreement is the developer's second to fall through in recent weeks as it scrambles for finance. Last week, two sources informed Reuters that Evergrande's $1.7 billion headquarters sale had fallen through due to bidder concerns about the company's severe financial status.

The latest setback comes only days before Evergrande's 30-day grace period to pay $83.5 million in coupon payments for an offshore bond expires, after which the Chinese developer will be regarded as in default.

Evergrande said in a regulatory filing on Wednesday that the interest payment grace periods on its U.S. dollar-denominated notes that became due in September and October had not expired. It didn't go into detail.

"The scrapped transaction has made it even more unlikely for it (Evergrande) to pull a rabbit out of a hat at the last minute," said a lawyer for some creditors, who asked to remain anonymous because he was not authorized to speak to the media.

"With the missed payments and the grace period approaching its end, people are preparing for a hard default." We'll watch how the corporation handles this in its creditor negotiations."

Reassurances

After a more than two-week halt, trading in China Evergrande's Hong Kong-listed shares, its property services company, and Hopson resumed on Thursday. Evergrande pared its early losses and was down 9.8% in early trading. Its property services division fell 5%, while its electric car division fell as much as 10%. Hopson's stock increased by 5.6 percent.

The property index in mainland China increased by roughly 2%.

Evergrande was once China's top-selling developer, but it is now drowning in debt, causing government officials to come out in force in recent days to say the company's difficulties will not spiral out of control and create a more significant financial crisis.

The string of official guarantees is likely intended to assuage investor concerns that the developer's debt crisis would spread to China's more significant property sector, which accounts for roughly a quarter of the country's economic development.

According to experts and attorneys, many real estate developers have turned to off-balance-sheet organizations to borrow money and avoid regulatory scrutiny since the government began cracking down on corporate debt in 2017.

Investors' fears of contagion were heightened on Thursday by statements from other property developers.

The sale of bonds issued by property developer Kaisa Group Holdings Ltd will cost Chinese Estates Holdings Ltd $29 million in the current fiscal year.

Modern Land (China) Co Ltd announced that it had stopped seeking investor approval to extend the maturity date of a dollar bond due on October 25. On Thursday, the company's stock was put on hold.

According to Clarence Tam, modern Land's decision weighed on investors' mood, fixed income portfolio manager at Avenue Asset Management in Hong Kong. In contrast, Chinese high-yield spreads continued to narrow as of Wednesday evening U.S. time, measured by an index of Chinese corporate high-yield issuers.

"The market is concerned that all single-B companies will opt out of paying," he explained.