Trading of Evergrande Group shares was suspended in Hong Kong on Monday, days after Chinese media reported that the indebted property developer would be forced to demolish a residential development in the southern province of Hainan.
The company, which has been at the centre of a sector-wide crisis in the country for months, disclosed in a filing to the Hong Kong stock exchange that the halt was “pending the release . . . of an announcement containing inside information”. The company did not add further details.
Evergrande missed a series of bond payments from September but had previously transferred the money owed before the 30-day grace periods ended. It was formally declared to have defaulted on its debts in December by rating agency Fitch after it failed to transfer funds due at the end of one such grace period.
The company, which has come to embody the vast debts of China’s property sector, has more than $300 billion of liabilities and is in the early stages of a drawn-out and politically-sensitive restructuring process. Both the government and investors have focused on its ability to maintain its hundreds of projects.
Evergrande said in a social media post on December 26th that work had resumed at 92 per cent of its projects, compared with about half in September, when its crisis sent shock waves across global markets.
Hui Ka Yan, its billionaire chairman, said in the same post that the company was in "extremely difficult circumstances" and the aim was to deliver properties to owners. Many property developers in China, including Evergrande, sell apartments to buyers before they are completed.
Planning permit
Over the weekend Cailian, a Chinese media outlet, reported that Evergrande had been ordered to demolish 39 buildings within 10 days because its planning permit was obtained illegally and had been revoked. The article cited a document allegedly from local authorities in Danzhou, a city in the northwest of the island province.
Trading in Evergrande's shares, which lost 89 per cent of their value last year, was also halted in October. The Hang Seng mainland properties index dropped 3 per cent in Monday trading.
Evergrande has grappled with interest payments on its international bonds, which, at $19 billion, exceed those of any other developer. But over the coming weeks it faces deadlines on principal payments.
In December it unveiled a new risk committee consisting mostly of representatives of state-owned enterprises.
Chinese property developers overall were subject to record numbers of downgrades by international rating agencies last year. Citi analysts noted that, for listed developers, overall contracted sales fell 1 per cent in 2020 in their first-ever decline, while Evergrande’s sales slumped 39 per cent. – Copyright The Financial Times Limited 2022
