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Evergrande halts trading of its stock and subsidiaries, raising expectations of an overhaul in the world’s most indebted developer

Hamartia Antidote

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Unfinished apartment buildings at the construction site of a China Evergrande Group development in Beijing on January 6, 2021. Photo: Bloomberg

Unfinished apartment buildings at the construction site of a China Evergrande Group development in Beijing on January 6, 2021.

Trading was halted for the shares of China Evergrande Group and two of its units on the Hong Kong stock exchange on Monday, raising expectations of an impending announcement in the restructuring of the world’s most indebted property developer.

Evergrande’s shares were halted along with the stock of the Evergrande Property Services Group unit and the China Evergrande New Energy Vehicle Group subsidiary, according to filings to the Hong Kong stock exchange, which gave no further details.

Evergrande, with 1.97 trillion yuan (US$310 billion) of liabilities, said in January it would unveil a plan within six months to reorganise its portfolio of businesses from its core real estate to electric cars, water bottling and even a football club.

The Guangzhou-based company would “continue to listen carefully to the opinions and suggestions of the creditors” and will formulate a preliminary restructuring plan, it said in January.

Local authorities of Guangdong province, which put some key assets of Evergrande under state ward, were aiming to release a framework debt restructuring plan by March, according to a report by Financial intelligence provider REDD in January.

Some creditors have given Evergrande breathing room, giving the company’s China unit Hengda Real Estate Group a 12-month extension until September 2022 to collect their coupon payment on 4 billion yuan of bonds due in 2025, according to a filing by Hengda’s lawyers on Sunday to the Shenzhen Stock Exchange.

Evergrande had appointed US restructuring experts Houlihan Lokey and Hong Kong-based investment bank Admiralty Harbour Capital to assess its capital structure after the property firm failed to pay investors who subscribed to its high yield wealth management products last September.

The company subsequently set up a risk management committee in December, saying it would actively engage with creditors to formulate a viable restructuring plan.

Evergrande is not the sole real estate company to be in crisis mode. The cracks in China’s housing market have widened as more developers joined the list of defaults, the latest being the Logan Group and Sunac China.

More drastic easing measures are expected to stop the property sector from collapsing.

The Ministry of Finance of the People’s Republic of China property tax pilot programme will not expand in 2022 given the current conditions do not allow it, last Wednesday.

“We expect PBOC to cut policy rates by a moderate 10 basis points in April and cut the reserve requirement ratio by 50 basis points over the next couple of months,” said Lu Ting, chief economist with Nomura. “Beijing will also likely allow more local governments to ease their local property curbs.”

Evergrande shares traded at HK$1.65 before the suspension, gaining 3.8 per cent so far this year, as compared to some 90 per cent plunge last year.
 

MH.Yang

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Evergrande's debt is only $300 billion? I remember Evergrande's debt reached US $500 billion. Evergrande's assets have always been higher than its liabilities. Evergrande's stock has been rising steadily in 2022.

China's real estate will not collapse. The reason for the downturn of the real estate market is that it is suppressed by the Chinese government. Xi's era has been using various policies to suppress real estate. For example, limit the number of real estate purchases, and buy a second suite with full payment. The reason why the Chinese government has suppressed the real estate market is that the Chinese government does not want house prices to be too high. It wants capital to flow into manufacturing.
 

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