The debt-laden Chinese real estate giant Evergrande issued an announcement on Friday (3rd) stating that it would not be able to fulfill its financial guarantee obligations of US$260 million and that it would seek an overseas restructuring plan. Soon after the announcement, the Guangdong Provincial Government immediately interviewed the founder Xu Jiayin and dispatched a working team to maintain normal operations for risk management.
Evergrande announced that, given the current liquidity situation, the Group is not sure whether it has sufficient funds to continue to perform its financial responsibilities. In the event that the group fails to perform guarantees or other financial responsibilities, it may cause creditors to demand accelerated debt maturity.
After the announcement of Evergrande, the Guangdong Provincial Government immediately interviewed Xu Jiayin, the founder of Evergrande, and agreed to send a working group to Evergrande to resolve risks, protect the interests of all parties, and maintain social stability. Subsequently, the People’s Bank of China, China Banking Regulatory Commission, and China Securities Regulatory Commission All will respond to this message.
A person familiar with the matter disclosed that Evergrande currently has a secured private placement debt due overseas with a total amount of US$260 million, accounting for less than 0.5% of the company’s total debt. The scale is small, and the creditors are mainly overseas funders.
In the past few days, Evergrande has tried its best to communicate and negotiate with the private equity creditor to execute its mortgage rights, but the other party has put forward unreasonable further requests.
According to market sources, the private equity creditor’s demands are very radical, and the actions taken will in fact directly harm the interests of Evergrande’s other overseas creditors. Evergrande has taken into account the rights of most other creditors and the principle of fairness, and cannot agree to its requirements and fulfill its requirements. Its guarantee obligations.
China’s party and the two sessions rarely issued a statement in response
The People’s Bank of China stated that the risks of Evergrande Group are mainly due to its own mismanagement and blind expansion. It also emphasizes that the overseas dollar bond market is highly market-oriented, and short-term risks for individual real estate companies will not affect the normal financing function of the medium and long-term market.
The China Securities Regulatory Commission stated that Evergrande Group is a case risk, and that China’s real estate industry is currently maintaining healthy development. It also pointed out that the current A-share market is generally stable, and the exchange bond market default rate remains at a relatively low level of about 1%. Real estate-related listed companies , The operating financial indicators of the bond issuer are overall healthy, and the spillover impact of Evergrande Group’s risk events on the stable operation of the capital market is controllable.
The China Banking and Insurance Regulatory Commission stated that China Evergrande’s failure to fulfill its contract is a case in the market economy. Evergrande Group’s financial debt accounts for about one-third of its total debt. The structure is relatively fragmented, and its financial investment is small. Therefore, this will not have any negative impact on the normal operation of China’s banking and insurance industry.
Before the deadline, Evergrande Group’s ADR (EGRNY-US) fell 3.29% due to the news, with a provisional report of US$6.91 per share.