Shares of debt-laden Chinese real estate developer Evergrande fell sharply on Monday after the company announced its inability to implement a restructuring plan aimed at ensuring its continuity.
The group’s shares fell by more than 22% on the Hong Kong Stock Exchange, reflecting investors’ concern about the real estate sector in China, which is currently facing an unprecedented crisis.
Evergrande announced, in a press statement, on Sunday evening, that it will not be able to issue new bonds, because its Hengda Real Estate Group is “subject to investigation,” which is currently hindering the restructuring plan.
This came two days after the group announced that meetings on the subject of its restructuring, which were scheduled to be held on Monday and Tuesday, would not be held in the end. The company justified the cancellation of the meetings by the need to “re-evaluate the terms” of the plan proposed in March, in order to adapt to “the facts on the ground and the demand of creditors.”
Evergrande, whose stock decline has been making headlines for some time, had massive debt at the end of June of about $328 billion.
The real estate sector in China has witnessed rapid growth in recent decades, as selling the property even before it is built allows financing other projects. But the debts of real estate groups have reached levels that prompted the authorities to put an end to their expansion, as of 2020.
Since then, access to credit has declined significantly for these groups, and some have been unable to complete their projects, exacerbating the crisis of confidence among potential buyers and driving down prices.
In mid-September, police in the southern city of Shenzhen said they had arrested a number of Evergrande employees, without specifying the charges against them.
The huge debts owed by the group contributed to the exacerbation of the real estate market crisis in China, which led to fears of the spread of infection at the global level.
In recent months, this unprecedented crisis has affected another heavyweight in the sector, Country Garden, which was known for its financial strength.
2023-09-25 10:57:45
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