Evergrande’s turbulent week renewed concerns about the liquidity crisis

As debt-laden real estate group billionaire chairman and his investors are dealing with financing difficulties, credit rating downgrades and expected dividend payouts, Evergrande’s brutal 12 months have gotten worse.

After Evergrande Group, which has a debt of nearly 2 trillion yuan ($309 billion), announced the cancellation of a planned special dividend, the group’s stock price plummeted 12% in Hong Kong on Tuesday.

Because of Evergrande’s role in China’s urbanization wave, this is the latest blow to Xu Jiayin, who was once China’s richest man. In July last year, his personal wealth was US$34 billion. After the developer’s share price plummeted 72% in the past year, his personal wealth took a major hit.

The Huis could have been from Evergrande First payment since 2018 Given that he holds 70% of the shares, the timing has attracted the attention of investors. Evergrande is one of China’s largest real estate groups, and as Beijing seeks to resolve a potential cash crunch, Evergrande is facing growing concerns. Control industry.

In the past week, a series of ominous developments related to Evergrande’s financing has evaporated billions of dollars in the company’s market value and put more pressure on Mr. Xu to cope with the relationship with lenders, customers and Beijing.

S&P Global Ratings will be released later on Monday Downgrade After Fitch Ratings and Moody’s made similar decisions last month, Evergrande’s credit rating.

“Hengda simply does not have enough cash to repay the upcoming borrowings unless it refinances or generates enough cash to fill the gap,” CreditSights analyst Luther Chai said according to the developer’s latest annual report.

With the tightening of credit conditions in China, Evergrande’s sales model has been under scrutiny.In addition to borrowing from banks and investors in China and around the world, Evergrande has USD 6 billion in debt that will mature next year. Evergrande is also heavily dependent on selling real estate before completing construction. Maintain cash flow Through business.

Although the rules and requirements are different, the so-called pre-sale, that is, customers usually purchase real estate through a mortgage on the basis of a down payment, is common throughout China.

After the Shaoyang authorities issued a legal notice, Evergrande shares were sold earlier last week. Hold pre-sale In a city in central China. The city subsequently stated that restrictions related to the alleged misuse of funds will be lifted.

Later this week, four banks, including HSBC, stopped providing mortgage loans for the unfinished development of Hong Kong Evergrande. HSBC declined to comment. According to Bloomberg News, the bank is considering revoking this decision.

Evergrande said in a statement that the progress of its Hong Kong project is “still proceeding as planned,” and other banks remain optimistic about mortgage loans for unfinished projects.

Michel Lowy, chief executive of SC Lowy, a Hong Kong-based investment group, said: “All these independent announcements are not really important, but in general, it shows that the pressure on the group is indeed increasing. The bigger come.” “So, the likelihood of them running out of liquidity in the next few months is increasing.”

The Hong Kong dollar per share line chart shows that Evergrande’s share price has been under pressure in the past year

TS Lombard Asian real estate analyst Andrew Lawrence said the pre-sale model is “usually unstable.”

“As the volume of pre-sales declines, developers are forced to borrow more, banks require more mortgage assets and higher guarantees, suppliers require advance payments, and pre-sales become worse because developers cut prices and end users do not trust. The company completed the development,” he added.

On Weibo, China’s popular Weibo platform, hundreds of complaints about project delays from frustrated home buyers appeared.

A home buyer in the southwestern city of Chengdu stated that he paid 1.1 million yuan for an unfinished Evergrande apartment in 2019, but the project has been delayed and is unlikely to be completed before the due date in July next year .

He added: “This will be a huge blow to my family because we have emptied our savings to pay a down payment of 300,000 yuan, and are under pressure to pay both the mortgage and rent at the same time.” I bought this apartment because of Evergrande’s reputation as a Fortune 500 company.”

Evergrande did not respond to a request for comment.

Evergrande’s banking relationships are also under pressure, which has raised concerns about its ability to refinance.Jiangsu Provincial Court of the Month freeze Evergrande Bank deposited 132 million yuan at the request of China Guangfa Bank as part of the dispute over the terms of early repayment, which triggered a stock sell-off after the order was circulated among traders.Evergrande issued a statement saying that it would prosecute Guangfa, but later expressed a quarrel Already resolved.

Evergrande said at the end of March that it had interest Debt dropped To 674 billion yuan, a year-on-year decrease of 23%.governmental “Three Red Lines” Policy Developers are required to reduce borrowing based on certain balance sheet indicators.

One channel to raise cash may be a series of exotic assets established by Evergrande. These include shares in a bottled water company and a valuable electric car manufacturer. Surpassing Ford Even pig companies.

“I believe that in the next few months, they are likely to sell non-core assets, find their own partners, sell some equity, raise some funds, and then deliver,” Roy said. However, he added that this situation is ultimately “dual” because it depends on how the central government views the prospects for restructuring.

Standard & Poor’s said on Monday that Evergrande “is still a company with rich assets,” but said it may lose further financing channels. It also pointed out that the company has reduced the contracted sales price to an average of RMB 8,100 per square meter, up to more than RMB 10,000 at the peak.

The rating agency said: “If the entity wants to remain profitable, it has little room for further price reductions.”

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