Suspended since March 2022 for non-presentation of financial results, the resumption of Evergrande’s listing on the Hong Kong Stock Exchange was expected on Monday August 28 to estimate the value of this adrift real estate giant. At the end of this session, the title of the Cantonese promoter fell by 79.4%, reducing its valuation to 590 million dollars (545 million euros), while it had reached 50 billion at its peak, in 2017.
As early as September 2021, the default of the most indebted developer in the world had drawn attention to the risk of a real estate crisis, after years of speculation. The group, known for its very aggressive approach to gaining market share, was the first victim of a debt reduction policy imposed in 2020 by Beijing in an attempt to deflate an increasingly obvious real estate bubble. But rather than a soft landing, the measures taken have plunged most private promoters into crisis, now unable to finance their activities.
Since then, around 80 developers have defaulted and hundreds of projects under construction have been halted, jeopardizing a sector that provided 25% of Chinese growth. In 2022, angry landlords protested, while others decided to stop repaying their loans for apartments whose construction was no longer progressing. In August, the payment default of Country Garden, considered so far as solid, revealed the extent of the crisis.
Evergrande’s difficult restructuring provides insight into the risks that the real estate sector poses to the Chinese economy. According to its latest balance sheet, Evergrande’s total debt stands at 2.388 billion yuan (302 billion euros), down slightly from 2022. Its net losses for the period from January to June were amounted to 33 billion yuan, half the amount of the first half of 2021.
However, the group saw its cash melt during the first half, since it fell from around 2 billion dollars to only 556 million, a low sum for a group of this size. “This is probably one of the worst financial situations I have ever seen in a companycomments Sandra Chow, analyst for the firm CreditSights, based in Singapore. The auditor has also added a disclaimer citing material uncertainties about Evergrande’s ability to continue its activity. »
Demand crisis
To ensure its survival, Evergrande had proposed a plan, in March, offering its creditors the choice of swapping their debt for new securities issued by the company or shares of two subsidiaries, Evergrande Property Services Group and Evergrande New Energy Vehicle Group. . But the proposal is struggling to convince: Monday, Evergrande has, once again, postponed a meeting with its creditors which was to take place the same day. “It is crucial that all (…) creditors understand the proposed restructuring process and its terms”, justified the company in a stock exchange document. This new discrepancy suggests that the company had not succeeded in convincing the holders of its debt to accept its plan, whereas a majority of 75% is necessary.
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