Evergrande Real Estate Group Ltd updates
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Evergrande has warned that failing to raise cash could jeopardize its debt, as China’s most indebted real estate developer struggles to prevent an emerging liquidity crisis.
The company’s extraordinarily sharp wording comes on Tuesday in an interim income statement that confirms a profit warning issued last week and outlines a series of measures to bolster its finances, including the sale of properties.
“The group has risks of default on loans and cases of litigation outside its normal course of business,” Evergrande said, adding that it will pursue further asset sales, control costs and attract new investors.
The warning comes as Evergrande is experiencing the worst upheaval in its history, with a stream of recent problems raising questions about access to finance, forces it to sell assets and it deserves an unusual public reprimand from the government about its debt risks.
Evergrande said ‘negative reports’ about his business had ‘adverse effects’ on his liquidity, leading to delays in construction fees and supplier payments, which in turn led to work on certain projects being suspended. It is said to coordinate with the government.
“If the projects in question do not start working again, there could be risks of a depreciation of the projects and an impact on the group’s liquidity,” the company said in its earnings report, which shows that the net profit year after year drops to 10 million. 5 billion ($ 1.6 billion). It has 778 projects in 223 cities in China.
Evergrande, which has expanded for decades on the back of China’s sweeping urbanization and whose president Hui Ka Yan was the richest man in the country, is now chasing down its debt. He said that the total loans at the end of June amounted to R572 billion, compared to 717 billion at the end of 2020.
His misery helped push borrowing costs in China’s most dangerous foreign lenders higher in recent months.
China’s biggest property developers have all come under pressure over Beijing’s reduction policy launched last year, but Evergrande went through a particularly chaotic 12 months after plans to list its subsidiary on the Shenzhen mainland feared ‘ a possible cash loss.
Market challenges have been exacerbated by a number of more recent issues, including a court order freezing one of them bank deposits, and the cessation of projects by local authorities. Evergrande, which relies heavily on customer prepayments and the issuance of trading accounts to contractors record numbers of lawsuits this year in Chinese courts.
As part of its cash-raising efforts, Evergrande wants to drop a stake in its electric vehicle business, which has not yet sold a car, and its real estate services group. Evergrande’s own shares have fallen by about 70 percent so far this year.
Nigel Stevenson, an analyst at GMT Research in Hong Kong, said Evergrande’s “options have narrowed” and that there are “large amounts of assets of uncertain value”.