Evergrande Real Estate Group Ltd updates
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China’s top financial regulators have ordered Evergrande to resolve its debt issues, in an unusually clear display of Beijing’s fears over the embattled property developer.
In a rare public admonishment, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a statement on Thursday that Evergrande must “actively diffuse debt risk and maintain real estate and financial market stability” after meeting with its executives.
The intervention follows months of deepening turmoil for Evergrande, whose debt-fuelled expansion at one point made its chair Hui Ka Yan China’s richest man. However, fears over the group’s ability to repay its vast debts have sent the developer’s shares and bonds tumbling.
Evergrande, which is one of China’s biggest corporate borrowers on international markets, had $104bn of interest-bearing liabilities outstanding at the end of March. It has said it plans to halve that figure by 2023.
The developer has come under pressure from guidelines introduced last year by Beijing aimed at reducing leverage across the country’s biggest property sector amid fears it would overheat.
In their statement on Thursday, the regulators said: “Evergrande, as a top real estate company, must earnestly implement strategic arrangements made by the central government to ensure the stable and healthy development of the real estate market, and strive to keep operations stable.”
Evergrande did not respond to a Financial Times request for comment.
Following the announcement, Evergrande’s bonds maturing in 2025 traded at 39 cents on the dollar, a distressed level and down from more than 80 cents as recently as May.
Although Evergrande’s indebtedness is longstanding, the group’s problems, ranging from court orders freezing its deposits over a loan dispute to local authorities temporarily halting sales at some of its projects, have mounted in recent months
Rating agency S&P earlier this month downgraded Evergrande’s rating to triple C, citing an “escalating non-payment risk”, and said its access to funding was “significantly more constrained than we expected”.
While it has no dollar-denominated debt maturing this year, Evergrande relies heavily on prepayments from customers buying its properties, as well as commercial bills that it issues to pay contractors. S&P estimates Rmb100bn ($15.4bn) of them come due this year.
Evergrande, which has built up an eclectic array of stakes in companies outside of real estate, has sought to sell assets to shore up its finances. In early August it sold a stake in Hong Kong-listed HengTen Networks, a Netflix-style streaming service, and last week it confirmed it was in talks to offload its stakes in its electric vehicle and property management businesses.
This week, Hui stepped down from his role as head of Hengda, the company’s mainland subsidiary, though he remains in charge of the overall business.
A failed attempt to achieve a stock market listing of Hengda in Shenzhen sparked fears of a cash crunch last year, as investors were entitled to demand the refund of about Rmb130bn in investments if no listing occurred. The majority of investors subsequently said they would not ask for their money back.
Additional reporting by Wang Xueqiao in Shanghai