Shares in struggling Chinese property developer China Evergrande Group plunged as much as 87 percent on the Hong Kong stock exchange today. The Hong Kong stock exchange suspended trading in the heavily indebted property company’s shares last March and has now resumed. Evergrande is the world’s most indebted property developer and is at the centre of China’s property crisis. The company said it had “adequately” complied with all Hong Kong stock exchange guidelines.
Evergrande is drowning in debt
The company has not paid a number of debts since the end of 2021. Next month, the courts will rule on the company’s plan to restructure nearly $32 billion worth of foreign debt obligations. At the end of last year, the company said its debt had risen to $340 billion.
The company’s shares have lost more than 99 percent of their value over the past three years because of Beijing’s crackdown on real estate firms. In 2020, the country began enforcing rules that control the amount of money large real estate firms can borrow.
The firm’s value has now fallen to HK$2.9 billion ($8.2 billion), down from HK$21.8 billion in the last trading of its shares less than 18 months ago. The company reached its maximum market valuation in 2017, at nearly HK$420 billion.
The exchange suspended trading in the stock on March 21, 2022. Its Hong Kong divisions, China Evergrande New Energy Vehicle and Evergrande Property Services, resumed trading last month after a 16-month hiatus.
The resumption of trading in the shares of all three companies is key for Evergrande Group as its foreign debt restructuring plan involves swapping some of its debt for equity-backed instruments. If the trading suspension reaches 18 months, Evergrande would be at risk of delisting from the stock exchange.
Repaying the debt
“There is little hope that Evergrande will be able to rely on home sales to repay its debt, as property buyers will prefer state-owned developers, and the company will not be able to take advantage of the incentive policy,” said Steven Leung, who manages Hong Kong bank UOB director Kay Hian.
On Sunday, the firm posted a loss of 33 billion yuan (nearly 101 billion won) for the first six months of the year. It had a loss of 66.4 billion yuan in the same period last year.
Evergrande’s financial woes have spread across China’s real estate industry. A number of other developers are defaulting on their debts, leaving behind unfinished construction projects across the country.
Source: ÄŒTK
