A substantial group of Evergrande’s offshore creditors is considering joining a liquidation court petition against the developer if it fails to submit a new debt restructuring plan by the end of October.
The embattled Chinese property developer Evergrande witnessed a substantial surge in its shares as trading resumed in Hong Kong following a brief suspension last week.
The company’s shares soared by more than 40% early on and maintained a 20% gain as trading progressed. The significant upswing comes after trading halts were imposed on the company following reports that its billionaire chairman and founder, Hui Ka Yan, was under police scrutiny for suspected “illegal crimes”.
Evergrande CEO Under Police Investigation
On Thursday last week, Evergrande made headlines when it disclosed that its Yan was under investigation for suspected illegal activities. The troubled property developer stated that he was “subject to mandatory measures in accordance with the law due to suspicion of illegal crimes.”
In a statement released Monday night, the Chinese property developer addressed the situation, stating, “The board is of the view that there is currently no other inside information in relation to the company that needs to be disclosed.” This clarity from the company contributed to the positive investor sentiment surrounding the resumption of trading.
While the firm saw its shares surge by an impressive 20.31%, other Hong Kong-listed property stocks had a challenging day. Country Garden Holdings, one of the prominent players in the industry, plunged by 7.67%, while Longfor Group Holdings suffered a 4.82% loss. New World Development was not faring any better, shedding 6.69% of its value, and Henderson Land Development traded 6.15% lower.
Evergrande’s recent trading halt occurred just a month after the company’s shares were reinstated following a 17-month suspension. The firm’s stock market value took a severe hit as a result, plummeting nearly 99% since July 2020 to HK$0.38 (£0.04).
In a surprising turn of events, the company’s Electric Vehicles (EV) unit also halted trading on Tuesday, citing an impending announcement.
Evergrande Faces Financial Turmoil
China’s largest property developer has grappled with a monumental $300 billion ($248 billion) debt burden and defaulted on its offshore debts in late 2021, coinciding with increased regulatory scrutiny of the real estate sector. The company’s market valuation has been hovering around 5 billion Hong Kong dollars ($639.8 million), a stark contrast to its former value before the default.
Earlier this year, the company filed for bankruptcy protection in the United States.
The crisis escalated last week when the company’s primary division in China, Hengda Real Estate, defaulted on 4 billion yuan (£457 million) of debt and faced difficulties in selling new debt due to an ongoing investigation—a critical component of its proposed restructuring plan.
A recent report from Reuters revealed that a substantial group of Evergrande’s offshore creditors is considering joining a liquidation court petition against the developer if it fails to submit a new debt restructuring plan by the end of October.
Market analysts are increasingly skeptical of the viability of the debt restructuring plan, with growing concerns that the company may face liquidation. However, a court hearing in Hong Kong scheduled for October 30th may determine Evergrande’s fate.
Meanwhile, the ongoing turmoil in China’s property sector extends beyond Evergrande, with other prominent developers struggling to complete housing projects, resulting in protests and mortgage boycotts by concerned homebuyers.
Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
