One billion euros less for Evergrande’s debt. At the end of November, the most indebted property developer in the world sold land in Shenzhen for 7.54 billion yuan (1.03 billion euros). The group that is shaking Chinese finance has been engaged in a painful process of selling assets since mid-2021. At the time, its debts to investors, but also to many unpaid Chinese suppliers and subcontractors, were valued at the equivalent of 270 billion euros, or 2% of Chinese GDP… Since the end of 2021, the he company is in default on several debt maturities in yuan (the Chinese currency) and in dollars. Many of Evergrande’s projects are on hold, angering landlords waiting for their homes.
In an attempt to manage this explosive situation, the Chinese authorities have created several local committees to oversee the sale of the company’s assets or organize the takeover of certain projects by other promoters. Several local governments have seized land held by Evergrande. In August, the group had obtained 5.52 billion yuan (753 million euros) after an agreement concluded with the city of Canton, which had seized a gigantic stadium whose construction was stopped. Evergrande is the co-owner of Guangzhou FC, the Cantonese capital’s football club, with Alibaba.
Deprived of bank loans
For Beijing, the challenge is to avoid a financial crisis, while maintaining an image of firmness in the face of the excesses of many promoters with dubious financial practices. By mid-2020, China had imposed “three red lines” accountants to Chinese promoters. Evergrande, which did not respect any of these three rules, found itself deprived of bank loans. No way for Beijing to wipe out the giant’s debt now with public money: investors will have to pay their share. Hence a standoff between them and the boss of the company, Xu Jiayin (also called Hui Ka Yan in Cantonese). According to Bloomberg, a committee that brings together the company, investors and the authorities of Guangdong province (southeast), where the group is based, wants to convince the boss to inject 2 billion dollars (1.9 billion euros) of his personal fortune in the company’s rescue plan to continue negotiations. Evergrande has promised a restructuring plan for the end of 2022.
Founded in 1996, Evergrande, or Hengda in Chinese, took advantage of the country’s accelerated urbanization to impose itself with a particularly aggressive strategy. Betting on the continuous rise in prices, the boss has multiplied projects across the country, with a motto: “High debt, leverage, high turnover, low cost”, in the words of one who was once the richest man in China. “Evergrande is still busy paying its debts, mainly through the transfer of assets and shares, explains Xie Yifeng, president of the China Urban Real Estate Research Institute. At the same time, they are trying to obtain the extension of lines of credit in order to ensure the delivery of ongoing projects. Since their last financial report published in September 2021, their situation has improved. I think we need to give them two or three years to get out of this debt crisis. »