Evergrande shares plunge 79% as trade resumes; extends creditor voting

Evergrande is at the centre of a crisis in property sector of China that has seen a string of debt defaults since late 2021, and its stock has been suspended for 17 months.

Evergrande, which is in the process of getting approvals for its debt restructuring plan, said on Monday that it would postpone by a month meetings for these creditors to vote on the proposal to give more time “to maximise creditor engagement and support informed-decision making”.

The scheme meetings will now take place on Sept 26, instead of Monday, but three people having direct knowledge of the matter said many creditors had already registered their vote by a deadline last Wednesday to submit forms.

The Shenzhen-based company needs approval from over 75% of the holders of each debt class to approve the plan, which offers creditors with a basket of options to swap debt for new bonds and equity-linked instruments backed by its stocks and those of its Hong Kong-listed units.

Property downturn

Evergrande’s valuation hit an all-time high of close to HK$420 billion in 2017.

The stock of Evergrande has been suspended since March 21, 2022, and resumed trading on Monday after the firm said it had fulfilled all conditions by the Hong Kong Stock Exchange. Evergrande would have faced delisting if the suspension had reached 18 months.

“Going forward things will continue to be difficult for both its operations and share performance,” reported Reuters quoting Steven Leung, Hong Kong-based director of UOB Kay Hian.

=”There’s little hope that Evergrande can rely on selling houses to repay debt because homebuyers would prefer state-owned developers, and it won’t be able to benefit from stimulus policies.”

The deepening of debt crisis in the property sector has weighed on the recovery of China’s economy, putting more pressure to policymakers to roll out stimulus measures. The government has so far relaxed residential housing loan rules and supported affordable housing, briefly cheering investors.

The Hang Seng Mainland Properties Index rose more than 6% in early morning session, before closing up 0.1%

“We haven’t seen meaningful improvement in the property market’s fundamentals,” said Mark Dong, Hong Kong-based general manager of Minority Asset Management, which manages more than $1 billion in assets. The firm has cut its holding in property stocks, Dong said.

Evergrande’s trade resumption also came after the developer on Sunday reported a narrower net loss for the first half of the year due to a rise in revenue.

The Shenzhen-based company also posted a combined net loss of $81 billion for 2021 and 2022 in a long-overdue earnings report last month, versus an 8.1 billion yuan profit in 2020.

Updated: 28 Aug 2023, 11:00 PM IST