World Evergrande Asset Dump Fails, No Progress on Other Sales Ahead of Saturday Deadline

11:16  21 october  2021
11:16  21 october  2021 Source:   newsweek.com

Modern Land, another Chinese developer, is struggling to pay its debts

  Modern Land, another Chinese developer, is struggling to pay its debts China's property crisis is ensnaring yet another developer. © Greg Baker/AFP/Getty Images Residential buildings are seen in Beijing on September 17. Modern Land is asking investors for more time to pay back a $250 million bond, according to a company filing with the Hong Kong Stock Exchange on Monday. The payment was due October 25. Modern Land said it wants to extend that deadline to the end of January as it seeks to improve "liquidity and cash flow management and to avoid any potential payment default.

The Evergrande Group formally dropped plans to sell a majority stake in its property services arm on Wednesday. This would have netted the company $2.6 billion ahead of a Saturday deadline marking the end of a 30-day grace period on its missed loan payment.

Evergrande's sale fell apart Here, a sign of the Evergrande Center is seen at the Evergrande Center building in Shanghai on October 9, 2021. © Photo by HECTOR RETAMAL/AFP via Getty Images Evergrande's sale fell apart Here, a sign of the Evergrande Center is seen at the Evergrande Center building in Shanghai on October 9, 2021.

According to Reuters, the deal reportedly fell through because Evergrande felt that the proposed purchaser Hopson Development Holdings had not met the "prerequisite to make a general offer."

Evergrand: "Manageable" risks for the financial system, assures Beijing

 Evergrand: © Hector Retamal An Evergrande building in Shanghai, September 22, 2021 Chinese Central Bank found Friday "manageable" the risks posed by indebtedness Evergrand's real estate giant for the country's financial system. The biggest promoter of China is dragging a slate estimated at nearly 260 billion euros, which threatens Domino effect the rest of the economy.

Evergrande said in an exchange filing that there had not been "no material progress" on the sale of its other assets, with the exception of its planned sale of a $1.5 billion stake in Shengjing Bank Co., according to Reuters.

Evergrande's struggles come alongside a growing trend of economic instability within China's real estate sector with companies other than Evergrande felling the effects. Sinic Holdings recently declared default, Kaisa Group saw its credit rating downgraded, China Properties Group defaulted on a loan and property developer Fantasia Holdings could not make recent payments.

Chinese officials nonetheless continue to assure the public that the situation remains under their control. Vice Premier Liu He told a Beijing forum on Wednesday that the risks associated with the real estate turmoil were "controllable and that reasonable capital demands from developers would be met," Reuters reported.

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People's Bank of China securities regulator, Yi Huiman echoed these sentiments at the same forum, saying that authorities would also look to curb excessive debt more broadly.

"(We need) to improve the effectiveness of the constraint mechanism on debt financing, to avoid excessive financing through 'high leverage'," Yi said, according to Reuters.

China's property developers bear a total outstanding debt of $5.24 trillion, according to Nomura, a Japanese financial holding company. In an interview earlier this week, Scott Kennedy, trustee chair in Chinese business and economics at the Center for Strategic and International Studies (CSIS), told Newsweek that China will look to control a potential Evergrande collapse in a manner that limits economic devastation but inserts newfound risk into its financial system.

Moving away from a system that offered general guarantees that large corporations would receive debt bailouts represents a large economic leap, and Kennedy holds reservations as to whether China could execute such a move in a manner that limits larger economic devastation.

China economy slows; officials say recovery ‘unstable and uneven’

  China economy slows; officials say recovery ‘unstable and uneven’ Officials say GDP grew at its slowest place in a year in the third quarter, amid power shortages and property woes.Data released on Monday showed gross domestic product (GDP) grew 4.9 percent in the third quarter, compared with a year earlier, the slowest since the third quarter of 2020. The growth was also below economists’ expectations with a Reuters poll of analysts expecting GDP to rise 5.2 percent and a poll by the AFP news agency predicting growth at 5 percent.

Successfully executing such a move, Kenendy said, would likely require Evergrande to sell off its assets in a manner that absorbs the losses of creditors and property developers. Following this recent failed deal, Evergrande's days to move forward with such an effort are limited.

"I don't think that (China's government has) fully convinced everybody that they're ready to successfully leap across this large chasm from one kind of system of reassurance to another," Kennedy said. "I think that is that is a harder sell."

Related Articles

  • Can Wall Street Trust the People's Bank of China?
  • Evergrande Sale Delayed as Company Seeks to Avoid Default, Other Firms Continue to Spiral
  • Evergrande CEO Prepares to Break Apart Company in Attempt to Avoid Default
  • People's Bank of China Says Evergrande Debt Situation Is 'Controllable,' Market Is Stable

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Evergrande wants to build electric cars, not homes .
Evergrande is starting to pay off its overdue debts and restart stalled real estate projects. Now the embattled Chinese developer is reportedly signaling that it wants to move away from housing and focus on cars. © Gilles Sabrie/Bloomberg/Getty Images The China Evergrande Group logo displayed atop the company's headquarters in Shenzhen, China, on Thursday, Sept. 30, 2021. Chairman Xu Jiayin, also known as Hui Ka Yan in Cantonese, said Friday that the firm wants to make electric vehicles its main business within a decade, according to Chinese state media.

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