HONG KONG / SHANGHAI, Sept. 14 (Reuters) – Cash-strapped real estate group China Evergrande Group (3333.HK) on Tuesday announced it had hired advisers to review its financial options and warned of the risks of default facing to the fall in real estate sales, sending its shares and bond prices fell sharply.
The real estate giant has struggled to raise the funds it needs to pay lenders and suppliers, regulators and financial markets fearing that a crisis will spill over into China’s banking system and potentially trigger crises. wider social unrest.
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. Hong Kong, without providing further details. on the products.
The company’s shares fell to their lowest level in six years in Hong Kong on Tuesday, and the Shanghai Stock Exchange halted trading in its listed bonds due to sharp swings in its price.
Evergrande said he has appointed Houlihan Lokey and Admiralty Harbor Capital as joint financial advisers, the clearest indication to date that he is considering restructuring options, analysts said.
The two companies will assess the group’s capital structure, assess its liquidity, explore solutions to alleviate the current liquidity stress and find an optimal solution for all stakeholders as soon as possible.
“Evergrande’s announcement marks the first step in a restructuring, which typically involves either late payment of interest, no payment of interest, or delay with haircuts,” said James Shi, debt analyst in difficulty with credit analysis provider Reorg.
He added that the liquidation would only take place if the restructuring failed.
Evergrande said Monday evening that online bankruptcy and restructuring speculation was “totally false.”
This happened despite growing market expectations that Evergrande might need to restructure, after China ruled in August that various lawsuits against the developer would be handled centrally in Guangzhou. Read more
Evergrande said it was in discussions with potential investors to sell some of its assets, but has made no “significant progress” so far.
The company said earlier this month that it was in talks to sell some assets, including stakes in Hong Kong-listed Evergrande New Energy Vehicle (0708.HK) and Evergrande Property Services (6666.HK).
Pressure on Evergrande – which has liabilities of 1.97 trillion yuan ($ 305 billion) – has intensified in recent weeks as fears over its ability to repay investors sparked protests that are sure to grow. shake up Beijing.
The company blamed “ongoing negative media reports” for weakening investor confidence, leading to a further decline in sales in September.
The company’s shares fell more than 10% on Tuesday morning to their lowest level since December 2014. Its listed electric vehicle spin-off fell more than 23% and shares in its property management unit fell by 8%.
In the debt market, Evergrande’s dollar bonds from June 2025 fell nearly 6 cents late Tuesday morning to 27 cents, yielding 58.45%, according to financial data provider Duration Finance.
Movements in the company’s highly illiquid onshore bonds were more erratic, with one bond traded in Shanghai surging nearly 23% and triggering a halt in trading, while another in Shenzhen plunged nearly 12% .
Shi de Reorg said there could be further bond sales if Evergrande defaults, but the fallout in the market would be limited as the risks have mostly been widely considered.
The biggest risks are probably social, he added.
Angry investors gathered near Evergrande’s headquarters in Shenzhen, southern China, on Monday to demand that the company repay loans and financial products. Read more
The developer’s difficulties in quickly selling assets and avoiding defaults on its massive liabilities increase the risk of contagion for other private developers, fund managers and analysts say. Read more
In a statement on Monday, she said she was facing “unprecedented hardship” but would do everything possible to return to work and protect the rights and legitimate 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)
Additional reports by Miyoung Kim and Andrew Galbraith; Editing by Shri Navaratnam and Sam Holmes
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