Monday, September 20, 2021
Group facing default?
Evergrande causes course massacre
The Chinese real estate giant Evergrande is pushing billions in debt. On the Hong Kong stock exchange, the group’s papers continue to rush into the depths. Other real estate stocks are also falling into the downward spiral. Investors now fear that the company will default.
The crisis of the Chinese real estate company Evergrande has led to heavy losses on the Hong Kong stock exchange. After the sustained decline in the past few days and weeks, Evergrande shares fell another 10.6 percent at the beginning of the week. Other Chinese real estate and financial stocks were also deeply in the red as there were fears that the crisis could spread to other companies. While the Hong Kong benchmark index Hang Seng lost more than three percent, a sub-index that summarizes real estate values lost almost seven percent. The markets in mainland China remained closed on Monday and Tuesday due to public holidays.
Evergrande has accumulated debts of the equivalent of more than 300 billion US dollars, the equivalent of around 256 billion euros. The troubled corporation has to find fresh money to pay banks, suppliers and bondholders on time. Investors fear a default. The problems have worsened for Evergrande in recent months, according to observers, as Beijing enforces stricter rules for the country’s highly indebted real estate sector.
This week, the Shenzhen-based group has to make several interest payments, as the financial service Bloomberg reported. Accordingly, the first repayment was due today, but with a postponement until Tuesday. Another tranche is due on Thursday. However, it was unclear how the Chinese holidays affected the repayment process. Investors are eagerly awaiting signs from the government as to whether and in what form they will rush to help the company.
Over the weekend, Evergrande offered investors to compensate them with real estate. The offer is therefore aimed at buyers of the company’s asset management products. Evergrande also admitted misconduct by several high-ranking managers. Six executives illegally redeemed several of the company’s investment products in advance. The company announced on Saturday that the matter is being taken very seriously. Most recently, rating agencies downgraded Evergrande’s credit rating several times. Since the beginning of the year, the Group’s share price has fallen by over 80 percent.
Evergrande hired financial advisors to examine “all possible solutions” to overcome the liquidity crisis, according to a statement last week, but warned at the same time that there was no guarantee that the company could meet its financial obligations.