(BFM Bourse) – The ultra-indebted Chinese promoter lost around 80% on the Hong Kong Stock Exchange on Monday after seeing its share suspended for 17 months. The group issued a reduction in its first-half losses and also postponed a meeting with its creditors as it renegotiates its heavy debt.
Evergrande had not seen its stock traded on the Hong Kong Stock Exchange for 17 months, during which time the title of the Chinese property developer was suspended.
This Monday, the group’s action therefore made its big comeback, after an absence of nearly a year and a half. Investors celebrated the event as it should: by selling its shares massively. The Evergrande share thus collapsed by nearly 80% on the Hong Kong Stock Exchange at 0.350 Hong Kong dollars, thus becoming a “penny stock”, that is to say a share whose par value is less than 1 dollar.
Evergrande shares were able to resume trading after the company complied with requirements from the Hong Kong Stock Exchange, including improving its internal control processes and releasing results for the 2021 and 2022 financial years.
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Postponement of a meeting with creditors
The resumption of Evergrande’s listing comes at a difficult time when Chinese growth is running out of steam, disappointing economists, and the real estate market is of great concern. Another Chinese property developer, Country Garden, was unable to pay interest on its bonds earlier this month and was forced on Friday to postpone a vote by its creditors on rescheduling its repayments until this week.
Evergrande itself on Monday decided to postpone a meeting of its creditors which was to begin that same day, which adds uncertainty to its financial restructuring, one of the most colossal that China has ever known, underlines Bloomberg.
This while its liabilities amounted to a total of 2390 billion yuan, or about 300 billion euros, at the end of June according to its half-yearly accounts published over the weekend. Evergande also reduced its loss in the first half of 2023 to 33 billion yuan from more than 66 billion a year earlier. Over the whole of 2021 and 2022, the Chinese company had lost more than 580 billion yuan, or more than 70 billion euros.
Cash erosion
Evergrande mostly burned cash in the first half, with free cash flowing from $2 billion to $556 million.
Remember that from 2020, the Chinese government has decided to clean up the massive indebtedness of the real estate sector by tightening access to credit for developers, which has complicated the refinancing of the big names in the sector, precipitating payment defaults. . Evergrande had been the most striking example and its financial difficulties had raised the specter of a Chinese “Lehman Brothers” at the end of 2021.
“He was the most high-profile victim of a wider crisis in the country’s property development sector. The government had stepped in to oversee the rescue, allaying fears of a disorderly collapse that could have rocked the world economy”, emphasizes John Plassard de Mirabaud.
Julien Marion – ©2023 BFM Bourse