China Evergrande Group, on of China's largest real estate firm, previously said it was on track to deliver a preliminary restructuring plan by the end of July.
HONG KONG: The clock is ticking for the world’s most indebted developer, whose liquidity woes sparked a broader debt crisis in China’s property industry that’s gone on to engulf more home builders, threaten banks and pose growing challenges for President Xi Jinping.
China Evergrande Group, once the country’s largest real estate firm, previously said it was on track to deliver a preliminary restructuring plan by the end of July.
That leaves mere days for the builder with about US$300bil (RM1.34 trillion) of liabilities, just as a shake-up stirs fresh uncertainties.
The group said chief executive officer Xia Haijun was forced to resign amid a company probe into how 13.4 billion yuan (US$2bil or RM8.9bil) of deposits were used as security for third parties to obtain bank loans, which some borrowers then failed to pay back.
Chief financial officer Pan Darong was also made to step down.
Siu Shawn, an executive director, will take over as CEO. Siu said that the firm has reached “basic consensus” on debt restructuring principles with multiple major global creditors, according to a Friday report by 21st Century Business Herald.
The company rocked markets late last year when it defaulted on dollar-bond payments after liquidity scares that began in 2020.
Contagion from that shock has dragged Chinese offshore junk notes, most of which come from property firms, deeper into distress.
Meanwhile, Evergrande’s creditors have been left with little detailed indication of how much they may recover, in what would be one of the nation’s largest-ever debt restructurings.
As important as any clarity on that would be, though, there’s much more at stake.
Money managers and policymakers are bound to see the Evergrande restructuring as an important precedent for dealing with ever-expanding defaults and restructurings in China’s real estate industry, which accounts for about a quarter of the world’s second biggest economy.
As risks build, the government has been ramping up support for the sector, just months away from a once-in-five-years Communist Party meeting where Xi is expected to seek a third term.
What began as a downturn in the housing market sparked by a government crackdown on developers’ excessive borrowing and real estate speculation in 2020 has snowballed in recent weeks into unprecedented loan boycotts from angry homebuyers and suppliers. — Bloomberg
