Evergrand Real Estate Group Update
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Shares of Evergrand’s electric vehicle unit crashed in Hong Kong when it scrapped plans for a second listing on Shanghai’s Star Market, as bondholders were stranded after the bond-ridden Chinese property developer failed to pay a significant amount last week.
The drawn-out list is the latest blow to a unit that once had more stock market valuations than Ford, and the liquidity crisis at Evergrand has caused tensions in global markets and raised fears among international investors that they would not be repaid if the company defaulted.
The developer failed to make a 8.5 million coupon payment on one of its dollar bonds on Friday and has an additional 300 days before it officially defaults. As of Monday morning, the developer had not provided any new information to international investors, according to a bondholder.
In anticipation of the biggest debt restructuring in the country’s financial history, at least two local governments in China have taken control of sales proceeds from Evergrand property to prevent possible misuse of funds.
Shares of Evergrand New Energy Vehicle fell more than a quarter when the company said in an exchange filing that its “proposed issue of Renminbi shares would no longer go ahead” following an agreement with broker Haitong Securities.
Evergrand’s NEV unit on Friday identified a “severe shortage of funds” and acknowledged the absence of payments for some of its employees and delays in paying factory equipment suppliers, which exacerbated the liquidity problem.
The division, whose shares are down nearly 94 percent this year in Hong Kong, was previously seen as Evergrand’s most promising growth prospect. Subsidiary shares rose after the ইন 4 billion capital injection, which included investments from billionaire founder of the property developer and formerly associated with Hui Ka Yan, China’s richest man.
But the company warned on Friday that without rapid capital injections, the growing cash deficit would “affect day-to-day operations … worsen employees’ ability to pay salaries and / or other expenses.”
Offshore bondholders are closely monitoring the company’s Evergrand stake as well as other assets outside the Chinese mainland before potential debt restructuring.