Struggling China Evergrande warns of cross defaults, tight liquidity

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HONG KONG, Sept. 14 (Reuters) – Cash-strapped China Evergrande (3333.HK) on Tuesday warned of cross-default risk as real estate sales continued to plunge, stepping up pressure on the developer, who quickly became the country’s biggest corporate headache.

The group is working to raise the funds it needs to pay its many lenders and suppliers, with regulators and financial markets fearing that a crisis could spill over into China’s banking system.

In the latest development, Evergrande said two of its subsidiaries failed to meet their guarantee obligations for 934 million yuan ($ 145 million) of wealth management products issued by third parties.

This could “lead to a cross default”, which “would have a material adverse effect on the activities, prospects, financial position and operating results of the group,” he said in a statement to the stock exchange. from Hong Kong.

The company’s shares collapsed in Hong Kong on Tuesday, and the Shanghai Stock Exchange halted trading in its listed bonds due to sharp swings in its price.

Evergrande added that he had hired financial advisers, signaling an acceleration of any restructuring plan.

The developer said that Houlihan Lokey (China) Limited and Admiralty Harbor Capital Limited will assess the group’s capital structure, assess its liquidity, explore solutions to alleviate the current liquidity problem and find an optimal solution for all stakeholders as soon as possible.

The group is also in discussions with potential investors to sell some of its assets, but it has so far made no “significant progress”, he added.

Evergrande said earlier this month that it was in talks to sell certain assets, including stakes in Hong Kong-listed units Evergrande New Energy Vehicle (0708.HK) and Evergrande Property Services (6666.HK).

Pressure on Evergrande – which has a liability of 1.97 trillion yuan ($ 305 billion) – has escalated in weeks as fears over its ability to repay investors spark growing protests that are sure to be sure. to shake up Beijing.

The company blamed “continued negative media reporting” for weakening investor confidence, leading to a further decline in sales in September.

The company’s shares fell nearly 9% on Tuesday morning to their lowest level since July 2015, en route for the second session of decline. Shares in its electric vehicle group fell 19.8%, while shares in its property management unit fell 5.9%.

Evergrande’s dollar bonds from June 2025 fell from more than 5 cents Tuesday morning to less than 28 cents, according to financial data provider Duration Finance. Movements in the company’s onshore bonds, which are highly illiquid, have been more erratic, with one Shanghai exchange-traded bond surging nearly 23% and triggering a halt in trading, while another bond in Shenzhen has plunged nearly 12%.

Angry investors gathered around Evergrande’s headquarters in Shenzhen, southern China, on Monday to demand that the company repay loans and financial products. Read more

The protest comes as the country’s most indebted developer will be unable to repay investors and its debt problems could pose systemic risks to China’s financial system.

The developer’s efforts to sell assets quickly and avoid defaulting on its massive liabilities increase the risk of contagion for other private developers, fund managers and analysts say. Read more

Evergrande said Monday evening that online speculation about its bankruptcy and restructuring was “totally false.”

In a statement, she said she was facing “unprecedented hardship” but would do everything possible to return to work and protect the legitimate rights and interests of her clients.

The company’s debt has been downgraded several times by rating agencies targeting the developer due to its efforts to restructure huge debts.

($ 1 = 6.4511 Chinese yuan)

Reporting by Miyoung Kim; Editing by Shri Navaratnam and Sam Holmes

Our Standards: Thomson Reuters Trust Principles.


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