Evergrande Real Estate Group Ltd updates
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China’s largest financial regulators have ordered Evergrande to resolve its debt issues in an unusually clear display of Beijing’s fears of the developed property developer.
In a rare public admonition, the People’s Bank of China and China Banking and Insurance Regulatory Commission said in a statement Thursday that Evergrande must “actively spread debt risk and maintain real estate and financial market stability” after a meeting with its executives.
Evergrande said Friday it would “fully implement” the requirements, including reducing its debt risks and maintaining market stability.
The company’s bonds maturing in 2025 traded 3 percent at 37 cents on the dollar after the announcement, a distressed level and well below their position of more than 80 cents as late as May. Its shares paired past gains to rise 0.2 percent, and have previously added as much as 6.4 percent.
The intervention followed for months deepening unrest for Evergrande, whose expansion on debt at one point made his chair Hui Ka Yan China’s richest man. However, fears about the group’s ability to repay its large debt have plagued the developer’s shares and bonds.
Evergrande, one of China’s largest corporate borrowers in international markets, had $ 104 billion in interest-bearing liabilities outstanding at the end of March. It has said so plans to halve this figure by 2023.
The developer has come under pressure after Beijing last year introduced guidelines in an attempt to reduce gearing across the country’s largest real estate sector amid fears it would overheat.
In their statement on Thursday, regulators said: “Evergrande, as a top real estate company, must seriously implement strategic arrangements made by the state to ensure a stable and healthy development of the real estate market, and strive to keep operations stable. ”
Although Evergrande’s indebtedness is long-lasting, the group’s problems range from court orders freezes its deposits over a loan dispute to local authorities, which temporarily halted sales of some of its projects, has increased in recent months
This month, the rating agency S&P downgraded Evergrande’s rating to triple C, citing an “escalating risk of non-payment”, saying its access to finance was “significantly more limited than we had expected”.
Although it has no debt in dollars expiring this year, Evergrande is heavily dependent on prepayments from customers who buy its properties, as well as commercial bills that it issues to pay contractors. S&P estimates that Rmb100 billion. ($ 15.4 billion) of which fall due this year.
Evergrande, which has built an eclectic range of efforts in non-real estate businesses, has sought to sell assets to increase its economy.
The company said it had held “preliminary exchanges” with Xiaomi about the Chinese smartphone maker taking a stake in its electric car business. Evergrande added that the discussions were not in-depth.
This week, Hui resigned from his role as head of Hengda, the company’s subsidiary on the mainland, although he remains in charge of the overall business.
An unsuccessful attempt to obtain a listing of Hengda in Shenzhen sparked fears of a cash crunch last year, as investors were entitled to demand repayment of around 130 million. Rmb in investments if no listing took place. The majority of investors subsequently said they would not ask for their money back.
Additional reporting by Wang Xueqiao in Shanghai and Hudson Lockett in Hong Kong
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