Evergrande loses 2 billion: When China Evergrande Group (3333.HK) shares returned to the market, their value plummeted by $2 billion, or 80% of their market value. The world’s most indebted real estate company is at a turning point in its offshore debt restructuring.
Evergrande is at the center of a real estate market problem in China. This issue has caused debt defaults since 2021. This company’s shares have been on hold for 17 months.
The company is going through a lengthy and complicated process to get creditor and legal approval. This general agreement is crucial for debt restructuring to go smoothly. Evergrande has extended the voting record deadline from August 23 to September 20. This streamlines the process. Before that, August 23 was the deadline.
Evergrande said in a document filed the same day that creditors will meet on September 26. This is different from August 28, when these meetings were scheduled. This is delayed because creditors must understand how the proposed restructuring will work and its rules.
This plan needs 75% of Evergrande’s debt holders in each class to approve. This need is crucial to the plan. This agreement is crucial to getting creditors to accept the comprehensive plan with many options. Debt can be converted into bonds and equity-linked instruments backed by the company’s assets and Hong Kong-listed affiliates.
Hong Kong-listed Evergrande shares fell 79% to HK$0.35 after sunset. The afternoon chaos mitigated some of the 87% drop that occurred when the market opened. The disaster lowered market capitalization from HK$21.8 billion ($2.78 billion) to HK$4.6 billion ($586.38 million) since its last trading session.
Also Read: China Evergrande Bankruptcy Filing: Impact on Chinas Real Estate Crisis and Economy
Hong Kong Stock Exchange trading ceased on March 21, 2022. The trading halt was lifted after Evergrande announced it met exchange requirements.
Evergrande Property Services Group (6666.HK) and China Evergrande New Energy Vehicle Group (0708.HK) have resumed trading. This stoppage could have taken Evergrande off the market for 18 months.
Hong Kong UOB Kay Hian Director Steven Leung predicted a bad future. The company’s operations and stock performance may suffer over time. Evergrande’s future is bleak because people prefer state-owned developers to buy homes and can’t get out of debt by selling them. Also, stimulus policies’ economic cushion is still scarce.
Evergrande was worth nearly HK$420 billion in 2017, bringing back memories of its founding. The business reopened the same day the developer reported a smaller first-half net loss. This was mostly due to increased revenue. During this six-month period, the company’s liabilities fell 2% to 2.39 trillion yuan ($328.14 billion) and its assets fell 5.4% to 1.74 trillion.
A one-month-late earnings report showed Evergrande’s 2021 and 2022 net loss of $81 billion. The month before, this was revealed. This is a big change from 2020’s 8.1 billion yuan. This makes future predictions difficult. As usual, auditor Prism Hong Kong and Shanghai didn’t provide a final assessment. They said there were too many unknowns about the entity’s cash flow and continuity to decide.
Evergrande responded that its future depends on the offshore debt restructuring plan and negotiations with its remaining lenders about repayment extensions. A dangerous dance on complicated terrain. Evergrande’s chances depend on the offshore debt restructuring plan’s execution.
Our Reader’s Queries
How much has Evergrande lost?
According to Prism, Evergrande suffered a staggering loss of $81 billion in the years 2021 and 2022. This is in stark contrast to the $1 billion profit the company claimed to have made in 2020.
What was the cause of Evergrande collapse?
In 2021, the property industry in China faced a major setback. The Chinese government became worried about the high debt levels in the industry, leading to a regulatory crackdown. As a result, Evergrande was unable to make interest repayments on over US$300bn in debt. This caused a liquidity crisis in China’s housing development sector.
How much debt is China Evergrande in?
The court hearing for the winding-up petition of Chinese property developer, Evergrande, has been postponed until Jan. 29. The company is currently attempting to gain support from its creditors for a plan to restructure over $300 billion in debt, in order to avoid liquidation.
What if Evergrande fails?
Should the restructuring efforts fall short and Evergrande fail to strike a fresh agreement with its creditors, the company may be forced into liquidation. This would entail the sale of its assets and a complete cessation of all business operations.