25th September 2023 – (Hong Kong) Shares of China Evergrande tumbled by as much as 24 percent on Monday (25th September) after the embattled real estate developer announced that it was unable to issue new debt due to an ongoing investigation into one of its subsidiaries, dealing a fresh blow to its restructuring plans.
In a statement released late on Sunday, Evergrande acknowledged that its principal subsidiary, Hengda Real Estate Group Co Ltd, was under investigation, rendering the group ineligible to qualify for new note issuance under the current circumstances.
This latest development adds to the challenges faced by the world’s most indebted company, coming just a week after certain staff members at Evergrande’s wealth management unit were detained by the police. The news of the investigation further dampened investor confidence and increased pressure on Evergrande’s restructuring efforts.
Evergrande’s shares, which carry more than US$300 billion in liabilities, plummeted by as much as 23.6 per cent to HK$0.42 (US$0.05), in line with a broader market decline of 0.6 per cent.
Earlier in the month, Evergrande had announced a delay in making a decision on offshore debt restructuring, pushing the deadline to next month to allow debt holders more time to evaluate its proposal. The restructuring plan requires approval from over 75 per cent of each debt class, offering creditors various options to exchange debt for new bonds and equity-linked instruments supported by the company’s stocks and those of its Hong Kong-listed units.
The ongoing challenges faced by prominent developers like Country Garden Holdings have kept buyer sentiment subdued, prompting Beijing to implement numerous measures to support the sector and stimulate property demand.
The property crisis in China, which accounts for approximately a quarter of the world’s second-largest economy, has caused ripples in global markets. Despite Beijing’s efforts to bolster the industry, these measures have shown limited impact thus far.
According to the latest data from the National Bureau of Statistics (NBS), as of the end of August, the combined floor area of unsold homes stood at 648 million square meters, indicating the scale of the challenge in the real estate market.