Evergrande Group slides amid liquidity crisis and another downgrade

Cao Qian
Evergrande's Hengda Real Estate fell 6.41 percent to HK$2.63 (34 US cents). Its two other listed subsidiaries, involved in new-energy vehicles and property management, also dived.
Cao Qian

Share prices of Hong Kong-listed China Evergrande Group units continued to plunge on Thursday, as the cash-crunched property developer suffered another downgrade as prospects of walking out of its liquidity crisis remains dim.

Evergrande's main unit Hengda Real Estate Group fell 6.41 percent to close at HK$2.63 (34 US cents) after hitting an intraday low of HK$2.52. The company's two other listed subsidiaries, involved in new-energy vehicles and property management businesses, dived 11.31 percent to HK$3.53 and 3.53 percent to HK$4.10.

Hengda Real Estate also suspended trading of its onshore corporate bonds on Thursday, a day after it received a notice from ratings agency China Chengxin International that the bonds' ratings had been downgraded to A from AA.

Both the bonds ratings and its issuer rating were put on a watchlist for further downgrades, according to a filing with the stock exchange.

One of the country's largest real estate developers, and the most indebted sitting on debts of more than US$300 billion after years of rapid expansion and aggressive diversification, Evergrande has been at the center of a storm recently amid rapidly growing worries over its ability to repay lenders, bond holders, suppliers, as well as wealth management product buyers.

The property giant said on Monday it has encountered "unprecedented difficulties" and vowed to do everything possible to resume normal operations and fully protect the rights and interests of its customers, but denied rumors of bankruptcy and reorganization.

One day after that in the latest development, Evergrande said on Tuesday it had hired Houlihan Lokey and Admiralty Harbour Capital as its joint financial advisers, which will assess the group's capital structuring, evaluate its liquidity, explore solutions to ease the liquidity stress and reach an optimal solution for all stakeholders as soon as possible.

The company also caught media headlines over the past few days due to rallies staged at its headquarters in Shenzhen since the weekend with disgruntled investors crowding its lobby to demand repayment of loans and wealth management products.

While speculation on where the Evergrande saga will head remains unclear, a government official said on Wednesday that more time is needed to assess its exact impact.

"Some large real estate companies did encounter difficulties in their operations and more time is needed to assess the exact impact on the country's real estate market as well as on the overall development of the industry going forward," Fu Linhui, a spokesman of the National Bureau of Statistics, told a press conference on the Q2 economic review

"Generally speaking, the domestic real estate market remains stable as the 'housing is for living in, not for speculation' principle continues to be carried out around the country," he said.

Hengda Real Estate shares have collapsed about 80 percent since the start of this year and slumped to an over-six-year low on Tuesday when they went under HK$3.


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