Evergrande: China property giant misses debt deadline (2024)

FAQs

Evergrande: China property giant misses debt deadline? ›

HONG KONG, April 27 (Reuters) - Embattled property developer China Evergrande Group (3333.HK) said on Thursday it would extend the deadline for receiving an incentive for its debt restructuring proposal to May 18 as the company disclosed levels of support from offshore debt-holders for its proposal.

HONG KONG, April 27 (Reuters) - Embattled property developer China Evergrande Group (3333.HK) said on Thursday it would extend the deadline for receiving an incentive for its debt restructuring proposal to May 18 as the company disclosed levels of support from offshore debt-holders for its proposal.

Analysts have long been concerned that a collapse of Evergrande could trigger wider risks for China's property market, hurting homeowners and the broader financial system. Real estate and related industries account for as much as 30% of GDP.

Evergrande founder Hui Ka Yan has started the new year with a new pledge. Hui Ka Yan, the embattled founder of real estate developer China Evergrande Group, said the company would definitely resolve the various risks it now faces and pay down its massive debt pile in 2023.

A Hong Kong property that China Evergrande Group planned to build a residential project on has been sold by receivers, with the defaulted developer projecting a loss of about $770 million.

Restructuring a debt may result in a reduced interest rate, a lower monthly payment, cutting the principal balance of the loan or bringing a past-due account back into current status. If you're considering restructuring, contact your lender and explain your situation.

It is a method used by businesses, individuals, and even governments to avoid defaulting on current debts by negotiating reduced interest rates. When a debtor is in financial distress, loan restructuring is a less expensive alternative to insolvency. It can assist both the debtor and the creditor.

The issues surrounding Evergrande are among several financial risks the Fed said had the potential to hit the US. Other risks include a potential worsening of the public health situation and a sharp rise in interest rates.

Reportedly, Evergrande also owes money to about 171 domestic banks and 121 other financial firms. Therefore, if the company defaults completely, there will be consequences for the banking system. A credit crunch could follow, analysts fear, which would be bad news for China and the global economy.

Overall, the U.S real estate market won't likely be impacted in a significant way due to Evergrande. What it does do is increase volatility in the global financial system, which is why some investors have panicked.

Who owns most of Evergrande debt? ›

NEW YORK, Sept 21 (Reuters) - Fund giant BlackRock and investment banks HSBC and UBS were among the largest buyers of the debt of embattled Chinese real estate developer Evergrande Inc, Morningstar data shows.

Yet Evergrande is more than $300 billion in debt and—despite making at least one payment to its creditors—is at risk of collapse, an event which could prove disastrous for the Chinese economy and send ripples through global financial markets.

As of June 30, BlackRock, UBS, HSBC and Ashmore Group were the biggest holders of Evergrande's international bonds, data compiled by Bloomberg shows, with a combined stash worth $1.3 billion at that time.

HONG KONG, Nov 22 (Reuters) - A Chinese municipal district said it had taken back 134,500 hectares (332.4 acres) of land formerly held by a unit of debt-laden developer China Evergrande Group (3333.HK) and had made no payment for doing so.

Evergrande Group is currently the second-largest property-developing company based in China based on sales. The company ranks 122nd on the Fortune Global 500. It is based in Shenzhen, China, and was founded in 1996 by Xu Jiayin.

Restructuring normally is accomplished in three ways: via an extension, a composition, or a debt-for-equity swap. An extension occurs when creditors agree to lengthen the debtor firm's repayment period. Creditors often agree to suspend temporarily both interest and principal repayments.

Although restructuring is a relief for borrowers, does restructuring affect credit rating? The answer in short is yes. A restructured loan in CIBIL report is reflected as such ('restructured') and this may impact your future chances of borrowing a fresh loan or opting for a credit card.

A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.

A haircut is the lower-than-market value placed on an asset when it is being used as collateral for a loan. The size of the haircut is largely based on the risk of the underlying asset. Riskier assets receive larger haircuts.

Which account cannot be restructured? ›

Banks cannot reschedule/restructure/ renegotiate borrowal accounts with retrospective effect.

Yes, you can apply for loan restructuring. The bank will assess your application.

No other country has reported more than 200 cases. Only banks with cross-border exposures that exceed 1% of total assets or 20% of total capital have to specify exposures to any particular country. Across the entire industry, U.S. banks have more than $110 billion of cross-border exposure to China as of Sept. 30, 2019.

Minsheng had about 29 billion yuan of exposure to Evergrande as of June 2020, according to a letter seen by Bloomberg that the developer sent to provincial authorities that year. The bank said in September that its loans to Evergrande had dropped by about 15% since June 2020, without specifying a level.

It's still possible the Chinese government may offer a bailout to Evergrande, but there is considerable uncertainty among regulators about how to handle the company. Protesters have already gathered near the Evergrande offices demanding the government compensate investors and apartment owners.

A slowdown in the Chinese real estate sector, which accounts for a significant proportion of the country's economic output, could have ripple effects on global growth. Evergrande's woes have rocked stock markets -- and the real estate sector makes up much of distressed dollar-denominated debt internationally.

The global economy could feel the effects of China's Evergrande crisis. Here's what investors should know. Chinese officials are expected to stem the spillover from liquidity issues at Evergrande, the country's largest property developer, before it slams the banking system and bleeds into foreign financial centers.

How bad are Evergrande's finances? Its property sales fell for the first time in at least a decade last year, plummeting 39% as sales were frozen for months before resuming in April 2022. It had about 1.97 trillion yuan ($283 billion) in liabilities as of June 2021, the most among its peers in China.

Without real estate, there will be far fewer profitable enterprises for Chinese banks to lend to, meaning China will be vulnerable to the next recessionary shock that comes along. So China's real estate situation is fairly different from that of the U.S. and Japan in their housing crashes, but in many ways it's worse.

Previous financial stability reports from the Fed have mentioned China, its high debt levels and “stretched real estate prices” as risks that could spill over to the U.S.

What US companies are invested in Evergrande? ›

Sep 22 2021

According to reports, major U.S. investment companies and other funds, including BlackRock, UBS, HSBC and Ashmore Group, held more than $1.3 billion of Evergrande's international bonds.

Evergrande's main lenders, led by China Minsheng Bank, have already set aside money to cover potential loan losses, according to two people familiar with the matter.

Chinese property giant Evergrande, whose liabilities exceed $300bn (£228bn), failed to meet interest payments to international investors. That prompted Fitch, an agency that rates companies' financial risk, to declare Evergrande in default.

One person familiar with the situation said that Evergrande had in the past pledged the building in exchange for loans from a consortium of lenders led by China CITIC Bank International, the Hong Kong subsidiary of the Chinese state-owned bank.

Evergrande borrowed money from banks and governments. It also sold investment products to average people to raise money for its projects. Evergrande agreed to pay interest on its debt.

Evergrande said it would appoint Prism Hong Kong and Shanghai Ltd as the new auditor, taking into account the recommendation of the company's audit committee. Evergrande and PwC have been investigated by Hong Kong's audit regulator since 2021 over the developer's 2020 accounts.

Struggling Chinese property developer Evergrande is unlikely to cause major damage to the U.S. economy and financial system, CNBC's Jim Cramer said Monday. However, the “Mad Money” host said, “Evergrande is definitely a systemic risk for China.”

Evergrande has nearly 800 projects across China that are unfinished, and as many as 1.6 million people who are still waiting to move into their new homes, according to an estimate from Barclays.

Evergrande's Chinese name does imply a kind of constant grandeur; similarly, the names of Evergreen and Ever Given have been translated exactly from their Chinese.

In fact, Treasuries are a logical investment for a country with high foreign currency reserves. China currently holds almost 11.60% of U.S. foreign debt.

How much of Evergrande debt is offshore? ›

The company said earlier this month that members of an ad hoc group of investors signed agreements in support of the restructuring. As of the end of 2021, Evergrande had $140.7 billion of offshore debt.

At the end of 2021, of the 98 countries for whom data was available, Pakistan ($27.4bn of external debt to China), Angola (22.0bn), Ethiopia (7.4bn), Kenya (7.4bn) and Sri Lanka (7.2bn) held the biggest debts to China.

Early in the pandemic, foreign ownership of US debt fell as countries such as Saudi Arabia, China, and Brazil sold their shares of US Treasuries for short-term capital.

Domestic ratings company China Chengxin International Credit Rating estimates the hidden debt of local governments was in a range of 52 trillion yuan to 58 trillion yuan at the end of 2022, about 1.5 to 1.7 times the amount of explicit debt.

Evergrande's major competitors are on much more solid financial footing. Four companies make up a third of the Global X ETF, all of them with investment-grade credit ratings in the BBB range: China Resources Land (1109. Hong Kong), Country Garden Holdings (2007. Hong Kong), China Overseas Land & Investment (6888.

Developers have been hobbled by a shortage of funds caused by a slump in home sales and an inability to raise new financing due to government controls on their debt.

Evergrande Group owns 565 million square meters (6,080 million square feet) of development land and real estate projects in 22 cities, including Guangzhou, Tianjin, Shenyang, Wuhan, Kunming, Chengdu, Chongqing, Nanjing, Zhengzhou, Luoyang, Changsha, Nanning, Xian, Taiyuan and Guiyang in Mainland China.

Types of debt restructuring

Some of the most common include: Loan modification. Payment deferral. Extending the loan term.

Evergrande is the world's most indebted developer with around $300 billion in liabilities. Its offshore debt restructuring, the country's biggest such exercise, is aimed at saving it from a disorderly collapse. The developer has $22.7 billion of offshore debt, all of which is deemed to be in default.

Debt restructuring is a process of modifying the terms and conditions of existing debt obligations to achieve some financial relief for the debtor. It can be a voluntary agreement between the creditor and the debtor or a result of a legal proceeding, such as bankruptcy or insolvency.

What is the Evergrande consent fee? ›

Creditors would receive a 0.25% consent fee based on the outstanding principal of their debts by way of new notes if they agreed to support the restructuring by Thursday at 0900 GMT -- a deadline that has now been extended by the company to 5:00 p.m. Hong Kong time on May 18.

The exact impact of a debt settlement on your credit score will depend on factors like the amount of debt. A debt settlement can stay on your credit report for seven years and your score could drop by more than 100 points.

As property developers run out of funding to finish properties, a growing number of buyers in China have stopped making mortgage payments on incomplete homes. The boycotts are a sign of the distress in China's property market as the government seeks to rebalance the sector.

Chinese investors are among the top foreign purchasers of residential real estate, along with Canadians, according to the National Association of Realtors. Other states have had concerns over foreign ownership of land and have made efforts to regulate it.

Evergrande was once China's top-selling property developer but has for months been struggling under the weight of more than $300bn of debts, of which around $20bn is held by investors from outside China.

Indeed, restructuring the terms of a loan does not guarantee that the borrower will honor the future repayments. Debt rescheduling represents a solution to the company's economic issues and it does not ensure the recovery of the company.

If no proposed plan of reorganization is approved by the court, the debtor, case trustee, and creditors may submit revised plans. Alternatively, the Bankruptcy Administrator can seek to dismiss the Chapter 11 bankruptcy case or convert the case to Chapter 7.

Restructuring is more of a prominent change in the terms and conditions of the existing loan when compared to rescheduling. However you may also incur additional administrative and legal cost on top of the usual interest charges.

Evergrande Group is currently the second-largest property-developing company based in China based on sales. The company ranks 122nd on the Fortune Global 500.