State seeks restructuring
China is rushing to the aid of the Evergrande crisis group
01/24/2022, 10:08 am
Several billion euros in debt are weighing on China’s second largest real estate developer Evergrande. Beijing now wants to avert corporate bankruptcy. The group is to be restructured for this purpose.
A solution to the debt problems is emerging at the struggling construction group China Evergrande. The second largest Chinese real estate developer is to be supported and restructured by the Guangdong provincial government, according to a media report. In addition, Evergrande announced at the weekend that a representative of the state asset manager China Cinda Asset Management should move into the board of directors. Investors saw this as a sign that the government was trying to stabilize Evergrande.
The shares on the Hong Kong stock exchange temporarily rose by around twelve percent on Monday. Evergrande owes more than $300 billion and has been unable to service interest on foreign bonds in recent months. The homebuilder owes around $20 billion to foreign investors. Economists and central bankers around the world had expressed concern about the Evergrande crisis. Bond and loan defaults could send shock waves through global financial markets.
According to a report by information provider REDD, the provincial government of Guangdong, where Evergrande is headquartered, plans to present a comprehensive restructuring plan by March. According to the report, the foreign assets are to be separated from the group and sold to state-owned companies. The money is to be used to repay loans and bonds from foreign investors.
So far, investors have assumed that Chinese investors will get their money back first. As a further sign that a corporate restructuring is imminent, investors interpreted the appointment of the head of the Evergrande subsidiary New Energy Vehicle Group to the board of directors. Together with the representative of the asset manager China Cinda, he is to lead the conversion. Evergrande had already declared in October that it would prefer the electric car business to the real estate business in the future.