Fears of Evergrande's Liquidation Soar as Trading Suspended - What Lies Ahead?
Evergrande Group's shares and those of its subsidiaries have been suspended from trading in Hong Kong amid mounting concerns over its ability to restructure its massive debt and avoid liquidation
Trading in shares of Chinese developer Evergrande Group and its two subsidiaries were suspended in Hong Kong on Thursday. Concerns have risen about the company's ability to successfully restructure its enormous debt and avoid liquidation. Evergrande, the real estate developer with the highest debt in the world, has liabilities amounting to $328 billion as of June. The company did not provide any reason for the trading suspension in its filing to the stock exchange.
The company's troubles intensified this week when it issued a warning on Sunday regarding potential obstacles to its offshore debt restructuring plan. The warning stemmed from an ongoing regulatory investigation into its main subsidiary located in mainland China.
Additionally, two subsidiaries of the company, namely China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, halted trading. The suspensions were disclosed in separate filings, but no explanations were provided for these actions.
Just weeks after news broke about Chinese police launching their first criminal investigation into Evergrande since its debt default nearly two years ago, Hengda Real Estate, the company's main unit in mainland China, stated on Monday that it is still collaborating with all involved parties to address the debt risks. This comes after missing payments on a 4 billion yuan ($547 million) bond.
Investors found a slight respite last month as Evergrande announced a notable reduction in its losses during the first half of the year. The company attributed this improvement to an increase in revenue, which was driven by a brief surge in the Chinese property market earlier this year.
However, subsequent developments have been consistently adverse, leading to an escalating number of investors who are supposedly considering liquidating the company unless a new viable survival strategy is promptly devised.
Previously the second largest real estate company in China, Evergrande's default in 2021 triggered a crisis in the property sector that continues to burden the overall economy.
In an effort to address its debt issues, Evergrande has been working on a restructuring plan under government supervision. In this regard, it has presented a multi-billion dollar proposal to reach a settlement with its international creditors. As a step in this process, Evergrande recently filed for bankruptcy protection in the United States.
If the offshore debt restructuring fails, and Evergrande is unable to reach a new deal with its creditors, it could face liquidation, where its assets are sold and it stops all operations.
