HONG KONG: China Evergrande Group will offer asset packages that may include shares in its two overseas-listed businesses as a sweetener for restructuring offshore debt, the developer said, as a stifling liquidity crisis in the property sector continues.
Evergrande’s restructuring proposal came on Friday (Jul 29) as China’s property sector, a key pillar for the economy, lurches from one crisis to another. The sector has seen a string of debt defaults by cash-squeezed developers.
HOW DID EVERGRANDE COME INTO THE PUBLIC EYE?
Chairman Hui Ka Yan founded Evergrande in Guangzhou in 1996 and listed the company in Hong Kong in 2009.
The company grew rapidly through a land-buying spree backed by loans and by selling apartments quickly at low margins. It was the second-largest developer in China in 2020, with US$110 billion in sales, US$355 billion in assets and more than 1,300 developments nationwide.
But after Evergrande plunged into a debt crisis in the middle of last year, its ranking slipped to number five for 2021 with US$64.51 billion in sales. It slipped further down to 32nd in the first half of 2022.
The firm is in other businesses too, including insurance and electric vehicles (EVs), and even owns a football club. Hui said late last year Evergrande would make its electric vehicle venture its primary business, instead of property.
HOW DID EVERGRANDE’S DEBT CRISIS UNFOLD?
In June 2021, Evergrande said it did not pay some commercial paper on time, and in July a court froze a US$20 million bank deposit held by the firm at the bank’s request.
Evergrande said in late August construction at some of its developments had halted due to missed payments to contractors and suppliers. And in September, it sought payment extensions for trust and bank loans.
Liabilities, including payables, totalled US$306 billion at end-June last year – equivalent to 2 per cent of China’s gross domestic product.
Its entire US$22.7 billion worth of offshore debt is now deemed to be in default after it missed several bond payments late last year. The crisis subsequently engulfed its peers as their credit conditions deteriorated, and drove several smaller firms to defaults.
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