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World Lured by promises of high returns, thousands gave Evergrande cash

11:01  22 september  2021
11:01  22 september  2021 Source:   aljazeera.com

Is the Evergrande meltdown China’s Lehman Brothers moment?

  Is the Evergrande meltdown China’s Lehman Brothers moment? Investors are worried an Evergrande debt default could send shock waves through the Chinese and global economies.Now, the images of disgruntled China Evergrande Group investors, employees and vendors camped outside the firm’s headquarters in Shenzhen in recent weeks have the potential to become a shorthand of their own.

Lured by the promise of yields approaching 12 percent, gifts such as Dyson air purifiers and Gucci bags, and the guarantee of China’s top-selling developer, tens of thousands of investors bought wealth management products through China Evergrande Group.

text: China Evergrande, the cash-strapped property developer, has stopped repaying some investors [File: Carlos Garcia Rawlins/Reuters] © Provided by Al Jazeera China Evergrande, the cash-strapped property developer, has stopped repaying some investors [File: Carlos Garcia Rawlins/Reuters]

Now, many fear they may never get their investments back after the cash-strapped property developer recently stopped repaying some investors and set off global alarm bells over its massive debt.

China’s Evergrande says will make a scheduled payment

  China’s Evergrande says will make a scheduled payment Indebted developer, however, has not said whether it will meet two other interest payments, including one on Thursday.Hengda Real Estate Group said in a statement on Wednesday it would make the coupon payment on its Shenzhen-traded 5.8 percent September 2025 bond on time on September 23.

Some have been protesting at Evergrande offices, refusing to accept the company’s plan to provide payment with discounted apartments, offices, stores and parking units, which it began to implement on Saturday.

“I bought from the property managers after seeing the ad in the elevator, as I trusted Evergrande for being a Fortune Global 500 company,” said the owner of an Evergrande property in the conglomerate’s home province of Guangdong surnamed Du.

“It’s immoral of Evergrande not to pay my hard-earned money back,” said the investor, who had put 650,000 yuan ($100,533) into Evergrande wealth management products (WMPs) last year at an interest rate of more than seven percent.

More than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties – bought WMPs that raised more than 100 billion yuan ($15.4bn) in the past five years, said a sales manager of Evergrande Wealth, launched in 2016 as a peer-to-peer (P2) online lending platform that originally was used to fund its property projects.

China Evergrande leaves bondholders guessing if it will pay up

  China Evergrande leaves bondholders guessing if it will pay up Its silence on its offshore payment dues has left global investors asking if they will have to swallow large losses.With liabilities of $305bn, Evergrande has sparked concerns its woes could spread through China’s financial system and reverberate around the world – a worry that has eased with the Chinese central bank promising to protect homebuyer interest.

Some 40 billion yuan ($6.1bn) of the investments are outstanding, said the person, declining to be named as they were not authorised to speak with the media.

China Evergrande did not respond to a request for comment on Tuesday, which was a public holiday in China.

With more than $300bn in debt, Evergrande’s liquidity crisis rattled global markets this week. The company has promised to repay WMP investors.

Pressure for new sources of capital

China’s years-long effort to deleverage its economy has pushed companies to resort to off-balance sheet investments in search of funding.

After Beijing further capped debt levels of property developers last year, the most indebted players like Evergrande felt even more pressure to find new sources of capital to ease mounting liquidity stress, turning to employees, suppliers and clients for cash through commercial paper, trust and wealth management products.

Threatening Evergrande Laise in China also leaves German suppliers for e-cars Trembling

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a group of people on a sidewalk: Some retail investors have been protesting at Evergrande offices demanding their money be returned [File: David Kirton/Reuters] © Provided by Al Jazeera Some retail investors have been protesting at Evergrande offices demanding their money be returned [File: David Kirton/Reuters]

Evergrande Wealth started to sell WMPs to individuals in 2019 after a regulatory crackdown led to a collapse of the P2P lending sector, said the sales manager and another Evergrande employee who bought the WMPs.

To attract investors, the sales manager offered gifts such as Dyson air purifiers and Gucci handbags to each person who bought more than three million yuan of WMPs during a Christmas promotion last year.

A product leaflet provided by the sales manager seen by Reuters showed the WMPs are categorised as fixed-income products suitable for “conservative investors seeking steady returns”.

The promise of high returns

In two products sold last November, a construction company in Qingdao was looking to raise up to 10 million yuan ($1.5m) with an annualised yield of seven percent in one and 20 million yuan ($3m) with yields ranging from 7.8 percent to 9.5 percent, depending on the investment size, in another. Minimum investments were 100,000 yuan ($15,459.7) and 300,000 yuan (46,379), respectively.

Evergrande: China's fragile housing giant

  Evergrande: China's fragile housing giant Chinese housing giant Evergrande is one of the country's largest private conglomerates and world's most indebted property developer, teetering on the brink of bankruptcy after years of rapid growth and a buying spree. With a presence in more than 280 cities, Evergrande is one of the largest private companies in China and one of its leading real estate developers. The firm made its wealth over decades of rapid property development and wealth accumulation as China's reforms opened up the economy.

Evergrande also usually offers additional yield up to 1.8 percent to certain investors, which can push returns to above 11 percent for a 12-month investment, said the sales manager.

Proceeds were to be used for Qingdao Lvye International Construction Co’s working capital, the documents showed. The firm could not be reached for comment during a public holiday.

Repayment would either come from the issuer’s income or from Evergrande Internet Information Service (Shenzhen) Co, a subsidiary that runs Evergrande Wealth and promises to cover the principal and interest if an issuer fails to repay, the prospectus said.

The sales manager said the Qingdao company was working on Evergrande projects and would use the payment from Evergrande upon completion to repay investors.

“It’s a de facto Evergrande product,” the person said.

Other highly leveraged Chinese conglomerates including HNA Group, which declared bankruptcy early this year, and China Baoneng have used similar products.

In a petition to various government bodies, a group of WMP investors in Guangdong accused Evergrande of inappropriately using money that should have gone to the issuers to fund its own projects, and not sufficiently disclosing the risks.

They also complained that they were misled by the stature of its chairman, Hui Ka-yan, noting that he was seated prominently during a 2019 celebration of the 70th anniversary of the founding of the People’s Republic of China.

“The investors trusted Evergrande and bought Evergrande’s WMPs out of our love for and faith in the Party and government,” they wrote.

Evergrande share places strongly - uncertainty remains .
The difficult-to-hit Chinese real estate company Evergrande has rising strongly on Thursday despite persistent fears of payment defaults on the Hong Konger Stock Exchange. © Andy Wong / AP / DPA Construction cranes are near an office building of the Evergrande New Housing Development Showroom. The Evergrande share finished trading with a plus of around 17 percent to 2.66 Hong Kong dollars. At times, the papers were even higher than 30 percent.

usr: 1
This is interesting!