Chinese property giant Evergrande and its boss reached an all-time low in December after $420 billion in debt went unpaid. Things just keep getting worse.
The debt-laden property developer Evergrande, which racked up debts worth $A420 billion, has suffered another embarrassing blow by suspending trading on the Hong Kong stock exchange for a second time.
Evergrande and all its units suspended trading in Hong Kong Monday morning, according to a notice to the stock exchange.
It is one of China’s largest developers, and has been involved in restructuring negotiations.
On Monday, the company announced that trading will be “halted” without giving a reason.
It follows news from December that Evergrande had been declared in default by Fitch Ratings.
Evergrande had been given a month-long grace period to make payments, but Fitch ratings cited a failure to do so.
“The non-payment is consistent with an ‘RD’ (restricted default) rating, signifying the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a material financial obligation,” Fitch said in a statement.
The company had been upfront about its dire financial position.
“In light of the current liquidity status … there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations,” Evergrande said in the note.
The company’s billionaire boss, Hui Ka Yan, had previously been requested to dip into his vast personal wealth to keep the company afloat, with Evergrande also desperately trying to sell off assets in a bid to raise much-needed cash.
Monday’s news comes ahead of an expected $2 billion repayment obligation on Wednesday, and another next month of $1.4 billion.
Earlier struggles to pay suppliers and contractors due to the debt crisis led to sustained protests from homebuyers and investors at the group’s Shenzhen headquarters in September.
The company has repeatedly said it will finish its projects and deliver them to buyers in a desperate bid to salvage its debts.
But in January it was ordered by authorities to tear down 39 buildings on Hainan island because the structures were built illegally on an artificial archipelago in the tourist hub.
The firm has tried to sell assets, with chairman Hui Ka Yan paying off some of the debts using his own personal wealth.
Evergrande’s woes have had knock-on effects throughout China’s property sector with some smaller firms also defaulting on loans and others struggling to find enough cash.
The International Monetary Fund warned in late January that the property funding crisis could have spillover effects on the broader economy and global markets.
Evergrande was once China’s largest property developer.
News.com.au reported in November that Beijing was about to send a clear message after years of bailing out property developers and poorly run state owned enterprises that the days of easy bailouts and freely flowing government cash injections are over.
The situation with Evergrande has ramifications for all of China.
A 2020 study authored by Harvard economist Kenneth Rogoff and Beijing Tsinghua University economist Yuanchen Yang found that real estate related activities accounted for 28.7 per cent of Chinese GDP in 2016.
— with AFP