China’s 2nd largest property developer is in big trouble

Evergrande Group, world’s most indebted real estate firm, has seen stock sink 70% in 12 months

National Weekend Edition /
Jul.July 31, 2021 09:00 AM
China’s 2nd largest property developer is in big trouble

Evergrande Group CEO Hui Ka Yan (Getty and Market Watch)

The hits keep coming for Evergrande Group, China’s second-largest property developer.

The company’s stock price has dropped more than 70 percent in the last year, its bonds are at record lows, it is in deep debt and on Monday, S&P Global Rating cut its credit rating two notches, according to Bloomberg.

A day after that, the firm’s stock price sank 13 percent after it announced it would not pay out a special dividend.

Evergrande is the world’s most indebted real estate developer with around $300 billion in liabilities, including some high-interest U.S. bonds. Around $7.4 billion worth of bonds mature next year, starting with $2 billion in bonds coming due next March.

The company has repaid all its public bonds this year, but could struggle with repayments in 2022 if it can’t access the capital markets.

A collapse of Evergrande could impact millions of Chinese homeowners and affect the wider economy, according to the report. The government could intervene to save Evergrande from disaster, but so far it isn’t certain that will happen.

“They really want to send a message that nobody is too big to fail,” TCV Group analyst David Loevinger told Bloomberg. “It is clear that mitigating systemic financial risks is a top priority.”

China’s other large real estate firms have also taken on large amounts of debt. They sold a combined $20.3 billion worth of bonds in the first half of this year, the second-highest total for that period since 2017.

The Chinese government is keeping a close eye on the real estate sector, and last year began to limit borrowing among developers and homebuyers.

[Bloomberg] — Dennis Lynch





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