Liquidity crunch intensifies, China Evergrande faces investor protests

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Evergrande Real Estate Group Co., Ltd. update

Evergrande has hired a restructuring consultant and warned that as China’s most indebted real estate developers face protests from home buyers and retail investors, their liquidity is facing “huge pressure” from declining sales.

In a statement to the Hong Kong Stock Exchange, Evergrande revealed that its monthly sales almost halved from June to August, from 71.6 billion yuan ($11 billion) to 38.1 billion yuan.

Although September is usually the peak sales season for developers, Evergrande warned last month Default Risk As the liquidity crisis continues to intensify, he accused “negative media reports” of depressing potential home buyers’ confidence in the company.

The company said it has hired Houlihan Lokey and Admiralty Harbour Capital to assess its liquidity and “explore all feasible solutions” to alleviate its growing debt crisis.

The Evergrande Group, headquartered in Shenzhen, southern China, has a total debt of nearly RMB 2 trillion, which raises concerns about the possibility of any failure to repay the debt. Bring wider risks To the country’s financial system and international bond market, where it borrows heavily.

The group’s growing credit dilemma coincides with the Chinese government Regulatory-driven Confronting large technology groups, real estate industry and other industries.

On Monday, the country’s Ministry of Housing announced a three-year inspection campaign to strengthen supervision of the real estate industry.Last year, the government implemented a strict “Three Red Lines” Policy Aiming to reduce the leverage ratio of developers, the Chinese banking regulator has listed it as the country’s biggest financial risk.

In recent days, Chinese social media platforms have been flooded with complaints from buyers who are worried about their new homes. Won’t finish And investors who buy wealth management products, which are sold to Evergrande’s real estate projects.

State media reported that after Evergrande suspended payments for some wealth management products, hundreds of people protested and met with executives at Evergrande’s Shenzhen headquarters on Sunday.

According to videos circulating on the Internet, the demonstrations continued on Monday and the police have deployed to maintain order. By Tuesday afternoon, the police had cleared the protesters’ buildings, although a group of unpaid Evergrande suppliers were still sitting outside.

An executive of Evergrande told the Financial Times that negotiations with retail investors are continuing in a neighboring building, and the developer is offering repayment within five years. “This is the best we can offer,” the executive said.

According to social media posts, Evergrande also held other protests in offices and development projects across China including Guangzhou, Zhengzhou and Qingdao.

Evergrande relies heavily on its clients to pay for the apartment before the completion of the project.

In the statement, Evergrande also revealed that its two subsidiaries failed to “fulfil their guarantee obligations of approximately RMB 934 million for wealth management products issued by other third parties as scheduled.”

In order to reduce debt, Evergrande is seeking to cut costs and Sell ​​assets Including shares of electric vehicle business and property service groups listed in Hong Kong, as well as flagship properties in Hong Kong.

Evergrande’s Hong Kong-listed stock fell as much as 11% on Tuesday, bringing its total decline so far this year to about 80%. Electric vehicle company Evergrande New Energy shares fell 22%.

On Tuesday, the group’s Beijing office was stripped. A worker said that the company had moved to a location outside the city center last month.

Retail investors of Evergrande wealth management products stated that they are entitled to an interest rate of 7% to 9%, and the company cannot repay overdue products, which has led to an influx of investors who intend to withdraw their funds.

In order to compensate investors who hold products or require early redemption, Evergrande has launched a new repayment plan or swaps between apartments and parking spaces.

Evergrande’s suffering has spread to the global bond market. Its bonds due next year have an exchange rate of as low as 30 cents against the U.S. dollar, helping to push up the yields of riskier Chinese issuers.

“Fear and uncertainty dominate market sentiment,” said Paul Lukaszewski, head of corporate debt for the Asia-Pacific region at Aberdeen Standard Investments.

Supplementary report by Hudson Lockett in Hong Kong

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