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Thursday, December 8, 2022

Evergrande Shares Slump on Renewed Default Fears

Concerns over Evergrande Group’s survival have resurfaced following reports that it may fail on its next loan payments.

On Monday, shares of the business, whose crisis has reverberated throughout the property and banking industries, plummeted by up to 20% to a new low.

Evergrande stated in a statement over the weekend that it couldn’t guarantee that it would “fulfill its financial responsibilities.”

It owes £300 billion (£226 billion) in debts, including to companies outside of China.

According to sources, Hui Ka Yan, the millionaire founder of a property developer, was called by Chinese officials to explain the current situation.

“In view of the company’s present liquidity condition, there is no certainty that the group will have adequate cash to continue to pay its financial commitments,” Evergrande stated in a statement.

“The corporation received a claim for around $260 million in performance obligations under a guarantee.”

“If the organization is unable to satisfy its guarantee commitments or certain other financial obligations, creditors may demand that repayment be accelerated.”

Despite Evergrande’s attempts to sell assets for months in order to repay debts, Conita Hung, investment director at Tiger Faith Asset Management, said the recent announcement implied the business was going to “surrender and seek rescue.”

“This sends a very poor signal,” she said, adding that even with Chinese government assistance, Evergrande’s troubles will take years to overcome.

The central bank, banks and insurance regulators, and securities regulators all issued statements over the weekend stating that the danger to the property industry could be managed.

China’s growing residential and commercial real estate markets spurred President Xi Jinping’s administration in Beijing to limit risky lending to a sector that some analysts predicted would collapse.

Evergrande was one of a number of developers that were cash-strapped as a result of regulatory borrowing restrictions, which resulted in offshore loan defaults, credit-rating downgrades, and stock and bond sell-offs.

To calm the situation, officials asked banks to loosen lending restrictions for developers and enable property businesses to obtain more capital from investors in October.

Sunshine 100 China Holdings, a smaller property developer, announced on Monday that it had missed a $170 million loan payment “due to liquidity challenges deriving from the unfavorable impact of a number of variables, including the macroeconomic climate and the real estate market.”

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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