Thursday, September 23, 2021

China Evergrande’s Snowballing Debt Crisis

HONG KONG – China’s most indebted property developer Evergrande Group is struggling to resolve its debt woes, while there are growing signs that policymakers are taking steps to avoid a hard landing for a company that has To fail is considered too big.

Here’s a timeline of the events that led to its debt problems and what the firm has done to raise funds so far:

August 2017

Evergrande has vowed to cut its debt for the first time, aiming to reduce its net gearing ratio to 70 percent by June 2020, from 240 percent in June 2017.

November 2018

The central bank named Evergrande in a report as one of the few financial holding groups it says could lead to systemic risk.

March 2020

Evergrande aims to cut its debt by 150 billion yuan ($23.3 billion) annually for three years.

August 2020

Regulators meet with 12 major property developers, including Evergrande in Beijing, to introduce caps for three different debt ratios in a pilot plan, known as the “three red lines.”

Evergrande sells 28 percent of its asset management unit in a pre-IPO deal for $3 billion.

It pledges to the Guangdong provincial government to approve a Shenzhen backdoor listing plan that has fallen short of four years, warning it will face a cash crunch that could lead to systemic risks.

September 2020

The company gives 30 percent discount on properties for a month to increase sales.

October 2020

It raised $555 million in a slimmed-down secondary share sale in Hong Kong.

November 2020

It ends the Shenzhen backdoor listing plan and strikes an agreement with some strategic investors not to demand repayment.

Evergrande Property Services Group’s Hong Kong IPO raises $1.8 billion.

January 2021

Electric vehicle arm China Evergrande New Energy Vehicles has raised $3.4 billion by bringing in six new investors.

March 2021

Evergrande is selling 10 percent of its online real estate and automobile marketplace Fangchebao to 17 investors for $2.10 billion in a pre-IPO deal.

It aims to meet all three caps on the debt ratio by the end of 2022, and lays out plans to list Fangchebao early next year and spin off other units, including spring water and tourism.

June 2021

Evergrande says it will sell more than half of its 58 percent stake in smaller peer Calxon, which is valued at $386 million.

Fitch downgraded Evergrande from ‘B+’ to ‘B’ with a negative outlook.

The developer arranges for HK$13.6 billion ($1.75 billion) to pay interest on one mature bond and all other dollar bonds, and says it will have no more bonds before next March.

Evergrande achieved one of the debt ratio caps set by regulators, reducing its interest-bearing indebtedness to about 570 billion yuan from 716.5 billion yuan six months ago.

July 2021

A court ordered a freeze on 132 million yuan bank deposits held by Evergrande at the request of China Guangfa Bank Co. Evergrande says the loan is not due until next March and it plans to take legal action.

Some Hong Kong banks refuse new loans to buyers of two unfinished Evergrande housing projects.

Evergrande scraps special dividend offer. S&P has downgraded its rating on the company by two places from B+ to B- with a negative outlook.

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Fitch downgraded the Evergrande from a “B” to “CCC+”.

August 2021

Evergrande has agreed to sell a total stake of HK$3.25 billion in its Internet arm Hengten Networks Group Ltd.

Moody’s downgraded Evergrande’s Corporate Family Rating (CFR) by two places from “B2” to “CAA1”.

Legal sources say lawsuits against Evergrande across the country will be handled centrally by the Guangzhou Intermediate People’s Court.

S&P downgraded Evergrande again two places from “B-” to “CCC”.

The company says it is in talks to sell certain assets, including Evergrande New Energy Vehicles and a stake in Evergrande Property Services.

State media reports that construction work on two Evergrande projects in Kunming has been halted, one of them for overdue payment and the other scheduled to be delivered to home buyers in October.

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Hui Ka Yan stepped down as chairman of the flagship entity Hengda Real Estate Group, which Evergrande says is due to the end of the backdoor listing plan.

China’s central bank and banking watchdog summoned senior Evergrande executives and issued a rare warning that the company needs to reduce its credit risk and prioritize stability.

Evergrande pledges to do everything it can to resolve its debt issues, and it will work to maintain the stability of the real estate market.

Evergrande has warned of liquidity and default risks if it fails to restart construction, dispose of more assets and renew loans, as it sees a 29 percent year-on-year increase in net profit, including non-controlling interests. -Reports year decline which is 10.5 billion yuan.

September 2021

Chairman Hui Ka Yan, along with the heads of the eight task force set up to guarantee home delivery, lead a pledge-signing ceremony to promise buyers it will complete construction of their homes.

China Chengxin International Credit Rating Company (CCXI) downgrades Evergrande and its onshore bonds from “AAA” to “AA” and consequently erodes the value of the bonds for use in mortgage repo trading.

Moody’s downgraded China Evergrande’s Corporate Family Rating (CFR) from “CAA1” to “CA” with a negative outlook.

Fitch downgraded Evergrande from “CCC+” to “CC” and marked a “likely” default.

Evergrande requests an extension on trust loan interest payments to creditors including CITIC Trust.

Media reports that Evergrande will suspend interest payments on loans to the two banks, as well as payments for its wealth management products, later in September.

Chairman Hui pledged in one platform to pay off all of its mature wealth management products as quickly as possible.

Angry investors crowded the lobby of Evergrande’s Shenzhen headquarters, demanding repayment of loans and financial products.

Some videos circulating on Chinese social media show what has been described as an Evergrande-related protest elsewhere in China.

Evergrande says online speculation about its bankruptcy and restructuring was “completely untrue”, but adding it was facing “unprecedented difficulties”.

Evergrande says it has hired financial advisors to examine its financial options and warns of cross-default risks amid declining asset sales.

($1 = 6.4451 Chinese Yuan)

($1 = 7.7794 Hong Kong Dollar)

by Claire Jim

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This News Originally From – The Epoch Times

China Evergrande's Snowballing Debt Crisis
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