In Friday’s filing, Evergrande said it has made “positive progress” in its offshore restructuring process, but
added that it’s still working with creditors and advisers on conducting a due diligence of the company.
“Given the size and complexity of the Group and the dynamics the Group finds itself in, the due diligence process remains ongoing,” it said, adding that the work might be completed in the “near future.”
The lack of a concrete proposal highlights the uncertainties surrounding Evergrande’s opaque restructuring of its huge debt and sprawling business operations at a delicate time for China’s property sector and economy.
International creditors had
complained earlier this year that they had been left completely in the dark about the companies intentions.
After creditors demanded updates and threatened to take legal actions, Evergrande pledged in January that it would release “a preliminary restructuring proposal” within six months. In June, it assured investors that it was on track to deliver the plan by the end of July.
The development comes at
a difficult time for China’s property sector, which has been struggling with a steep fall in home prices, weakening buyer demand, and a series of debt defaults by real estate firms.
China’s economy has also slowed dramatically after
strict Covid lockdowns dampened demand and disrupted industrial activities. Gross domestic product
expanded 0.4% in the second quarter, the lowest growth rate since early in the pandemic. Analysts are worried that the government’s 5.5% annual growth target might be out of reach.
Why is Evergrande important?
Evergrande is massive — it has about 200,000 employees, raked in more than $110 billion in sales in 2020, and owns more than 1,300 developments in more than 280 cities.
Many of its property projects have been delayed since last year because of the company’s liquidity issues.
Analysts have long been concerned that a collapse of Evergrande could trigger wider risks for China’s property market, hurting homeowners and the broader financial system. Real estate and related industries account for as much as 30% of GDP.
Since Evergrande’s default, several other major developers, including Kaisa, Fantasia, and Shanghai-based Shimao Group, have also sought protection from creditors.
In recent weeks, the real estate crisis has escalated further. Thousands of angry homebuyers who had previously paid down payments for unfinished projects
threatened to stop paying mortgages if construction is not completed in time. Some of them have
staged protests in central Wuhan city, pressuring local government and banks to help push developers deliver their prepaid homes.
“The mortgage boycotts are a double threat to developers and to the housing market,” said analysts at Capital Economics in a report late last month.
They have drawn attention to the problem of cash-strapped developers being unable to complete properties that they have already sold, which is “putting off new homebuyers.” The boycotts have also made banks more cautious about issuing mortgages, which could dent property sales further, they added.
In a report last week, S&P Global Ratings estimated China’s property sales could drop by a third this year because of mortgage strikes, as people believe developers won’t be able to complete presold units in time— the most common way they sell homes in the country.
“Without sales, many more developers will collapse, which is both a financial and an economic threat,” said Capital Economics analysts.
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