The crisis in the real estate sector in China is getting worse. Trading in shares of the ailing Chinese construction company Kaisa has been suspended, the Hong Kong Stock Exchange announced on Wednesday.
The trading interruption came after an insider with direct knowledge of the matter said it was unlikely that Kaisa could meet a deadline of $ 400 million to settle debt. Kaisa ranks 27th among property developers.
A group of bondholders had made a proposal to Kaisa for a deferral, but the result was still open, reported the Bloomberg finance agency, referring to informed people. The company’s share price has lost 75 percent of its value this year.
At the construction company Evergrande, which is in debt with more than 300 billion dollars, payment deadlines had already expired on Monday. Both companies are now threatened with a total failure of the affected foreign bonds, which would affect other bonds and, according to experts, could lead to major problems in the entire industry. Evergrande says it has foreign bonds outstanding to the tune of $ 19 billion, while Kaisa has $ 12 billion.
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The shares of the heavily indebted construction company China Evergrande fell to a new record low of 1.72 Hong Kong dollars on Wednesday.
Similar to Evergrande, China Aoyuan Group announced last week that there is no guarantee that certain payments will be made due to liquidity problems. The Aoyuan Group ranks 35th among the Chinese real estate groups. As credit ratings have been downgraded, more and more creditors are demanding their money back.
Rating agencies such as S&P Global and Fitch recently lowered the credit ratings of Chinese construction companies and warned of contagion effects. Analysts now assume that the government in Beijing will intervene to prevent a larger wave.
Evergrande has set up a risk committee with representatives from the state who are supposed to restructure the group. The government also wants to avoid social problems. Evergrande operates and develops 1,300 real estate projects across the country, many of which are still ongoing. A total of 200,000 people are employed and nearly four million people are hired for construction work every year.
More: Evergrande Crisis: New worries about a domino effect.