Friday, September 17, 2021

Evergrande’s tumultuous week renews liquidity crisis fears

- Advertisement -

Must read

A brutal year for Evergrande is going from bad to worse as the billionaire president of the highly indebted real estate group and his investors face financial problems, credit downgrades and a U-turn in an expected payment.

Evergrande shares fell 12 percent on Tuesday in Hong Kong after the group, which has nearly Rmb2tn ($ 309 billion) of liabilities, announced it would cancel a planned special dividend.

That marked the last blow for Hui Ka Yan, who was once the richest person in China, thanks to Evergrande’s role in China’s urbanization waves. His personal fortune, which stood at $ 34 billion last July, has taken a substantial hit after a 72% drop in the developer’s share price over the past year.

Hui would have benefited from Evergrande’s first payment since 2018 given his 70 percent stake, but his timing had caught the attention of investors. Evergrande, one of China’s leading real estate groups, has faced growing concern over a possible cash shortage as Beijing seeks to control the industry.

Over the past week, a wave of sinister events related to Evergrande’s access to financing has wiped out billions of dollars from the company’s market value and has piled up even greater pressure on Hui to navigate relationships with lenders, customers and Beijing.

Late on Monday, S&P Global Ratings downgraded Evergrande’s credit rating, following similar decisions by Fitch Ratings and Moody’s last month.

“There just isn’t enough cash for Evergrande to pay off its next loans unless it refinances it or generates enough cash to fill that gap,” CreditSights analyst Luther Chai said, based on the developer’s latest annual report.

As credit conditions tightened in China, scrutiny turned to Evergrande’s sales model. In addition to borrowing from banks and investors both in China and globally, where it has $ 6 billion in dollar-denominated debt due next year, Evergrande has relied heavily on the sale of properties before finishing construction to maintain cash flow through the business.

Pre-sales calls, in which customers often borrow through mortgages in addition to a deposit to pay for a property, are widespread in China, although the rules and requirements vary.

Evergrande’s shares were sold early last week after a legal notice from Shaoyang authorities ordered the company to halt advance sales in the central Chinese city. The city later said that the restrictions, which were related to the alleged misuse of funds, would be reversed.

Later in the week, four banks, including HSBC, stopped offering mortgages for incomplete Evergrande developments in Hong Kong. HSBC declined to comment. Banks are considering reversing the decision, according to Bloomberg News.

In a statement, Evergrande said that progress on its Hong Kong projects “is still proceeding as planned” and that other banks maintain a positive outlook towards mortgages for unfinished projects.

“All those announcements independently are not really important, but taken together it is an indication that the pressure is really increasing on the group,” said Michel Lowy, chief executive officer of SC Lowy, a Hong Kong-based investment group. “The likelihood that they will run out of liquidity in the coming months as a result of that is increasing.”

HK $ per share line chart showing Evergrande's share price has crushed over the past year

Andrew Lawrence, an Asian property analyst at TS Lombard, said the presale model was “typically unstable.”

“As the pre-sale falls, the developer is forced to borrow more, banks ask for more pledged assets and higher collateral, providers request an advance payment and the pre-sale worsens as the developer reduces prices and end users they don’t trust the company to complete the development, ”he added.

Hundreds of frustrated homebuyer complaints about delayed projects appeared on Weibo, the popular Chinese microblogging platform.

A home buyer in the southwestern city of Chengdu said he had paid 1.1 million rupees in 2019 for an unfinished apartment in Evergrande, but that the project had been delayed and was unlikely to be completed by the due date on next july.

“That would be a huge blow to my family as we have drained our savings to make the Rmb300,000 down payment and are under pressure to pay mortgages and rents at the same time,” he added. “I bought the apartment because of Evergrande’s reputation as a Fortune 500 company.”

Evergrande did not respond to a request for comment.

Evergrande’s banking relationships have also come under pressure, raising concerns about its ability to refinance. A Jiangsu province court this month froze Rmb132m from Evergrande’s deposits at the request of Guangfa Bank as part of a dispute over early payment terms, prompting a sell-off of shares after the order circulated among merchants. . Evergrande released a statement saying it would sue Guangfa, although it later said the dispute had been resolved.

Evergrande said in late March that its interest-bearing debt had fallen to 674 billion rupees, 23% less than a year earlier. The government’s “three red lines” policy requires developers to reduce their loans based on certain balance sheet metrics.

One outlet to raise cash could be the exotic array of assets Evergrande has amassed, including a bottled water company, a stake in an electric vehicle maker worth more than Ford, and even a pig farming business.

“I think there is a decent chance that in the next few months they will sell nonessential assets, find partners, sell stocks, raise some money, deliver,” Lowy said. But, he added, the situation was ultimately “binary” because it boiled down to how the central government viewed the prospect of restructuring.

S&P said Monday that Evergrande “remained an asset-rich company,” but cited the risk of losing more access to financing. He also noted that the company had reduced prices for contracted sales to an average of Rs 8,100 per square meter, compared to a peak of more than Rs 10,000.

“The entity has little room to continue cutting prices if it wants to remain profitable,” said the rating agency.

Video: Will China Become the Center of the World Economy?

Do Not Miss

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This is how your business works – TechCrunch

0
Gingko Bioworks, a synthetic biology company now valued at around $ 15 billion, begins trading on the New York Stock Exchange today. Gingko's market...

UN: climate promises put world on ‘catastrophic track’

0
BERLIN: The world is on a "catastrophic path" to a warmer future unless governments make more ambitious promises to reduce greenhouse gas emissions, the...

DOJ Charges 138 With Health Care Fraud, Including Opioids, Covid, Telemedicine

0
AndreyPopov | iStock | fake imagesThe Justice Department on Friday announced criminal charges against 42 medical professionals and nearly 100 others for...

Former congressman charged with manslaughter in the death of a white...

0
RUSSELLVILLE, Ark. (AP) - A former Arkansas sheriff was charged Friday with manslaughter in the fatal shooting of a white teenager whose death...

UK Culture Secretary’s ‘Medieval Burqa’ Comments Denounced | Islamophobia news

0
The new UK culture secretary has been accused of Islamophobia for her views on Muslim women and the description of the burqa as a...

Denmark returns to pre-pandemic life with a great pop concert |...

0
Copenhagen, Denmark - While many in Europe were concerned about the Delta variant, university student and social worker Sofie Mari Jensen joined tens of...

California withdrawal could boost Newsom’s influence by 2022

0
SACRAMENTO, California (AP) - The recall election that once threatened to derail the governor of California. Instead, Gavin Newsom's political future has breathed...

Aurora Propulsion Technologies closes € 1.7m seed for spacecraft maneuvering and...

0
This year, more spacecraft will be sent into orbit than ever before in human history, and the number of satellite launches is only expected...

It’s not just about populism: grassroots democracy thrives across Europe |...

0
TThe last decade has been painful for the health of European democracy. The dramatic authoritarian turns in Hungary and Poland have attracted the...

Message in a bottle from Japan hits the beach in Hawaii...

0
A glass bottle that was thrown into the sea 37 years ago by high school students in Japan was found on the island of...

Elections in Canada: How Are Leaders Fighting Islamophobia? | ...

0
Toronto Canada - Canada has suffered more Islamophobia-motivated mass killings in the past five years than any other G7 country, according to the National...

Rune Labs, whose software aggregates the vast amount of brain data...

0
Andrea Park / FierceBiotech: Rune Labs, whose software aggregates the vast amount of brain data in an integrated environment, raises $...

Facebook steps up fight against climate misinformation, but critics say effort...

0
Facebook has announced new efforts to combat climate crisis misinformation on its platform, including expanding its climate science center to provide more reliable information,...

Roboflow, which provides tools for developers to create computer vision models,...

0
Kyle Wiggers / VentureBeat: Roboflow, Providing Tools for Developers to Create Computer Vision Models, Raises $ 20M Series A Led by...

“Shikhar Dhawan needs to follow the ‘VVS Laxman model’ to return...

0
Former India head coach MSK Prasad urged Shikhar Dhawan to follow the 'VVS Laxman model' to return to T20I cricket after being rejected by...

Suspicious bets made prior to Goldman’s $ 2.2 billion acquisition of...

0
Sam Edwards | fake imagesThe day before Goldman Sachs announced its $ 2.2 billion purchase of financial technology lender GreenSky, someone placed options...

Myanmar Sets October 1 for Corruption Trial of Aung San Suu...

0
Supporters of the deposed civilian leader say the charges against her are politically motivated and are an attempt to discredit her.The trial of Myanmar's...

First thing: the United States and the United Kingdom fight to...

0
Good Morning.The United States and Britain are fighting to contain an international backlash over a nuclear submarine pact reached with Australia amid concerns that...

Giant: California Wildfires Threaten Famous Giant Sequoias

0
THREE RIVERS: Firefighters wrapped the base of the world's largest tree in a fire-resistant blanket as they tried to save a famous grove of...

Purdue band’s ‘biggest drum in the world’ won’t be on field...

0
As the Purdue football team and marching band head to Notre Dame this weekend for their Saturday afternoon showdown, a special member of the...

Activists push for next German leader to act on climate

0
BERLIN (AP) - Environmental activists on Friday lobbied for Germany's next chancellor to crack down on climate change, including advancing the country's coal phase-out...

Child Abuse: Apple Urged To Quickly Launch Image Scanning Tool |...

0
Child protection experts from around the world have called on Apple to urgently implement new scanning technologies to detect images of child abuse.In August,...

US Will Continue To Encourage Normalization With Israel: Blinken | ...

0
The top US diplomat describes steps to "widen the circle" of normalization that do not include peace with the Palestinians.The Biden administration will build...

While urging vaccination, WHO rejects vaccination data on its staff

0
GENEVA: The United Nations health agency, which has repeatedly urged the world to get vaccinated against Covid-19 and other diseases, declined on Friday to...

US paves the way for more sanctions over Ethiopia’s Tigray conflict

0
WASHINGTON: The United States on Friday paved the way for more sanctions to be imposed on parties to the conflict in northern Ethiopia, where...

Will DeMarcus Lawrence play for the Cowboys again in 2021?

0
The Dallas Cowboys suffered a blow to the solar plexus Wednesday when star passing running back DeMarcus Lawrence broke his foot in practice. DeMarcus...

Manchester United, Invesco, Take-Two and others

0
Take a look at the companies that are making headlines before the bell rings:Manchester United (MANU) - The soccer team operator reported a quarterly...

John Cena apologizes for WWE’s latest failed experiment

0
At SummerSlam, WWE and John Cena revealed a cool new shirt inspired by Super Mario Bros. 3. The only problem was the massive $...

The Taliban must form an inclusive Afghan government

0
UNITED NATIONS (AP) - The UN Security Council unanimously approved a resolution on Friday that says Afghanistan's new Taliban rulers must establish an inclusive...

UK: Mixed response to controversial Brick Lane redevelopment plan | ...

0
London, United Kingdom - Despite a months-long campaign against the redevelopment of Brick Lane in East London, a local council committee voted in favor...

Lucha Brothers and Miro defend their titles, Dark Order member Anna...

0
Welcome to the preview for this week's AEW Rampage episode. In recent weeks, the company has struggled to put on a notable show.Although...

Herbicides Top Global Crop Protection Chemicals Market With 50% Share, Says...

0
LONDON, September 17, 2021 / PRNewswire / - According to the United Nations, the world's population is projected to reach 9.8 billion by 2050,...

Dutch Foreign Minister Resigns Over Afghanistan Evacuation Chaos | Political...

0
Sigrid Kaag acknowledged that the government's slow response meant that some of the local staff and people who had worked for the Dutch troops...

Faroese Prime Minister vows to review dolphin hunt amid outrage over...

0
In a parked car overlooking the ocean sit two of the biggest whale killers in the Faroe Islands. They look exhausted, but not...

Ed Sheeran Announces Stadium Tour for 2022 | Ed Sheeran

0
Following his ÷ tour, which ran from 2017 to 2019 and became the highest-grossing tour of all time, Ed Sheeran returns to the stage...

Rent Payment Clue in Wirecard’s Jan Marsalek Quest

0
Wirecard AG updatesSign up for myFT Daily Digest to be the first to know about Wirecard AG news. Munich police have investigated a € 80,000...

Phillies and Mets face off in ‘what could have been’ series...

0
The "what could have been" series begins tonight, with a pair of 2021 National League All-Stars taking the mound, Zack Wheeler for the Phillies...

Will Urban Meyer leave the Jacksonville Jaguars to work at USC?

0
For Urban Meyer, January probably looks like it happened eight years ago, rather than eight months ago.`` I'm ready to train the Jacksonville Jaguars...

Xi Jinping calls on SCO countries to encourage Afghanistan to have...

0
BEIJING: Chinese President Xi Jinping said on Friday that SCO countries should intensify coordination and encourage Afghanistan to establish an inclusive political framework linked...

Glean, an enterprise search engine startup co-founded by Google and Facebook...

0
Kenrick Cai / Forbes: Glean, an enterprise search engine startup co-founded by Google and Facebook veterans, emerges from stealth with $...

Elon Musk Says Tesla Will Use One Week Of Personal Driving...

0
Kirsten Korosec / TechCrunch: Elon Musk says Tesla will use a week of personal driving data to determine whether owners who...

khan: Opposition criticizes Imran Khan for rising fuel prices in Pakistan

0
ISLAMABAD: Pakistan's opposition parties criticized the government on Thursday for rising fuel prices. Pakistan People's Party (PP) Chairman Bilawal Bhuto-Zardari said Prime Minister Imran...

Is James McAvoy’s impromptu thriller the weirdest Covid movie yet? ...

0
TThe pandemic has subjected us to a brave new world of cinematic experiences: a horror shoot on Zoom, Anne Hathaway trying to rob Harrods,...
- Advertisement -

Don't Miss