© Reuters. FILE PHOTO: The company logo is seen at the China Evergrande Group headquarters in Shenzhen, Guangdong province, China, 26 September 2021. REUTERS/Aly Song/File Photo
By Clare Jim
HONG KONG (Reuters) – China Evergrande Group lost $2.2 billion, or 79% of its market value, on Monday after its shares resumed trading. This was a crucial move for the world’s most leveraged real estate company to restructure its offshore debt.
Evergrande is at the center of a crisis in China’s real estate sector, which has seen a spate of defaults since late 2021, and its shares have been on hold for 17 months.
The developer, which is currently seeking approvals from creditors and courts to implement the debt restructuring plan, said Monday it would postpone meetings with those creditors to vote on the proposal by a month to allow more time “to do creditor engagement.” to maximize”. and support informed decision-making”.
The plan meetings will now take place on September 26 instead of Monday, but three people with direct knowledge of the matter said many creditors registered their vote as early as last Wednesday by a deadline for filing forms.
Evergrande needs the approval of more than 75% of holders of each debt class to approve the plan, which offers creditors a basket of options to swap debt for new bonds and equity-linked instruments backed by its shares and those of its Hong Kong shares . listed units.
Hong Kong-listed shares ended Monday down 79% at HK$0.35. The market capitalization fell from HK$21.8 billion (US$2.78 billion) since last trade to HK$4.6 billion (US$586.29 million).
real estate downturn
Evergrande’s valuation hit an all-time high of nearly HK$420 billion in 2017.
The stock has been suspended since March 21, 2022 and trading has resumed after the company said it had met all the conditions of the Hong Kong Stock Exchange.
Its units, China Evergrande (HK:) New Energy Vehicle Group and Evergrande Property Services Group, both resumed trading last month after a 16-month hiatus.
Evergrande should have faced delisting if the ban reached 18 months.
“Going forward, both operations and stock performance will continue to be difficult,” said Steven Leung, Hong Kong-based director of UOB Kay Hian.
“There is little hope that Evergrande can rely on house sales to pay down its debt because homebuyers would prefer government developers and the company cannot benefit from the stimulus measures.”
The deepening debt crisis in the real estate sector has hampered the Chinese economy’s recovery and increased pressure on policymakers to implement stimulus measures. So far, the government has relaxed rules on home loans and supported affordable housing, which briefly drew investor applause.
The Mainland Properties Index rose more than 6% early this morning before closing up 0.1%.
However, new home prices in China are unlikely to see any increases this year, according to a Reuters poll.
“We haven’t seen any meaningful improvement in real estate market fundamentals,” said Mark Dong, general manager of Hong Kong-based Minority Asset Management, which manages more than $1 billion in assets. The company has reduced its stake in real estate stocks, Dong said.
Evergrande’s resumption of trading also came after the developer reported a smaller first-half net loss on Sunday on a surge in sales.
Evergrande also posted a combined net loss of $81 billion for 2021 and 2022 in a long-overdue earnings report last month, compared to a profit of 8.1 billion yuan in 2020.
As with Evergrande’s previous two financial statements, Prism Hong Kong and Shanghai auditors did not provide a conclusion on this report, citing several uncertainties related to going concern.
($1 = 7.2834 yuan)
($1 = 7.8447 Hong Kong dollars)
Source : www.investing.com