The real estate company is heavily indebted.
(Photo: Bloomberg)
Beijing The highly indebted real estate group Evergrande cannot present its annual financial statements for 2021 by March 31 as required. The group announced this in a mandatory announcement by the Hong Kong Stock Exchange. Evergrande, as well as the two subsidiaries Evergrande Property Services and Evergrande New Vehicle, stopped trading in their shares in Hong Kong yesterday.
Evergrande cites the fact that internal reviews have not yet been completed as the reason for the delay in presenting the balance sheet. According to this, auditors have had to carry out additional checks since the second half of last year due to “dramatic changes” in business activities. The tested result for 2021 will be submitted as soon as possible, Evergrande said. Until then, trading in his shares will remain suspended.
The group also announced that the equivalent of more than two billion dollars in assets from the property management subsidiary Evergrande Property Services are currently being blocked by banks as collateral. The company plans to set up a committee of inquiry to investigate the case and its implications.
The second largest Chinese real estate group has accumulated debts of more than 300 billion dollars. There is also speculation about other off-balance sheet commitments. An offshore bond with a volume of two billion dollars matures on Wednesday.
Top jobs of the day
Find the best jobs now and
be notified by email.
Evergrande missed several regular interest rate dates in 2021. At the beginning of December, an Evergrande subsidiary owed interest even after a 30-day grace period had expired. The rating agencies Fitch and S&P rated this as a partial default.
Several indebted real estate companies cannot meet the balance sheet date
While Evergrande’s main real estate business has been struggling financially for months, the services unit has long been seen as the conglomerate’s cash cow. With a most recent market capitalization of HK$24.9 billion, the subsidiary was worth more than the parent company with HK$21.8 billion.
In a separate statement, Evergrande also said it considered the matter a “significant incident” and needed to assess the impact on itself.
Evergrande presented preliminary figures for the past financial year at the beginning of January. Accordingly, sales revenue fell by 39 percent compared to the previous year. Sales almost stagnated from October as its liquidity problems worsened.
Chinese real estate companies listed in Hong Kong have until March 31 to submit their audited financial statements. These are the first audited financial statements since the sector’s liquidity crisis worsened last year as a result of tighter lending rules in China. However, in addition to Evergrande, other highly indebted Chinese real estate companies such as Shimao, Sunac and Ronshine China have already announced that they will not be able to meet the deadline.
>>Read also: China and the Evergrande shock: “The time to make money with real estate is over”
According to Hong Kong Stock Exchange rules, shares must be suspended from trading if an issuer fails to file audited financial statements on time. The trading stop applies until the required information is published.
Evergrande and its financial advisors will hold a conference call for investors on Tuesday evening Chinese time, according to Bloomberg news agency. The construction company informed its creditors in January that it would present a preliminary restructuring plan within the next six months.
Around three quarters of the assets of private households in China are invested in real estate.
(Photo: Reuters)
Concerns about Evergrande going bankrupt and a domino effect on the important Chinese real estate market worried the financial markets last year. However, the biggest risk associated with the crisis is that China’s households will lose faith in real estate as a viable asset class.
According to estimates, around three quarters of the assets of private households are invested in real estate. Your investments are the basis for the construction boom of the past two decades. They also drive economic growth. The Chinese real estate sector accounts for around a third of China’s economic output.
The Chinese authorities are expected to take further easing measures to support the real estate market. After a meeting of the State Council chaired by Liu He, the state’s top economic adviser, last week, politicians announced that the real estate industry would be supported. However, no concrete measures have been taken so far. China’s central bank left interest rates unchanged on Monday, despite heightened economic uncertainty.
More: Evergrande share suspended from trading