Evergrande Crisis: China's Biggest Real Estate Group Is In A Free Fall On The Stock Market

In a dramatic turn of events, Evergrande's shares tumbled by a staggering 87 per cent on Monday as trading in the beleaguered Chinese property developer's stock resumed after a hiatus of nearly a year and a half.

This plunge was accompanied by the company's decision to postpone crucial restructuring meetings with its creditors.

Emerging as the most debt-laden developer globally, Evergrande disclosed over the weekend that it had incurred first-half losses amounting to Rmb33 billion ($4.5 billion), a move made to partially fulfill the requirements of the Hong Kong stock exchange.

This was undertaken to lift a trading suspension that had persisted for 17 months. It is worth noting that under exchange regulations, a company facing an 18-month trading suspension runs the risk of being delisted.

In a bid to navigate its intricate web of financial woes, which includes more than 2,000 lawsuits totaling about Rmb535 billion, Evergrande chose to postpone its meetings with international creditors in Hong Kong for an additional month.

These meetings, initially scheduled for this week, were anticipated to culminate in a vote on a comprehensive restructuring plan.

The outlined proposals, earlier presented this year, aimed to remunerate international investors through notes tied to Evergrande's publicly listed subsidiaries based in Hong Kong.

These subsidiaries encompass its electric vehicle enterprise and a property management venture. These stocks, too, recently recommenced trading in Hong Kong following prolonged suspensions.

The unfolding fate of these meetings carried significant implications, not only for the beleaguered Chinese property sector but also as a potential blueprint for forthcoming restructurings or analogous endeavors.

The property sector has been grappling with immobilization and funding scarcities, with Evergrande's financial turmoil representing a pivotal facet after its default in 2021. This larger trend of stagnation has been dampening China's economic growth for nearly two years, accompanied by a slew of defaults from numerous peers in the industry.

In the face of these challenges, Beijing has refrained from direct bailouts or extensive stimulus packages, even in the midst of resurgent concerns regarding the spillover of the property crisis into the broader financial domain.

In recent developments, Country Garden, formerly the largest private developer in China in terms of sales, encountered bond payment defaults on the international stage, triggering a 30-day grace period. Similarly, Zhongrong, an investment firm, defaulted on savings products.

Evergrande, which had previously withheld its financial position for much of 2022 and the present year, revealed last month that it had incurred a staggering $81 billion loss across 2021 and 2022. The conglomerate's liabilities currently stand at a staggering Rmb2.39 trillion.

In addition to disclosing financial results, Evergrande's quest for trading resumption mandated addressing concerns raised by its former auditor, PwC, which had resigned in January. These concerns chiefly revolved around estimations of off-balance sheet liabilities.

Stepping into the auditing role after PwC's departure, Prism Hong Kong and Shanghai opted not to provide a conclusive verdict on the first-half results, citing "multiple uncertainties relating to going concern."

As a recent development in the ongoing saga, Evergrande filed for Chapter 15 bankruptcy protection in the United States this month.

With regard to the legal quagmire, Evergrande acknowledged on Sunday that it was enmeshed in various litigation proceedings initiated by multiple parties.

These litigations span a spectrum of issues, encompassing unpaid borrowings, pending construction projects, and delayed project deliveries. The company expressed its commitment to proactive engagement with the concerned creditors and an earnest pursuit of diverse avenues to address these legal disputes.