China Evergrande Group is one of the largest property developers in China. They are currently experiencing a debt crisis due to miss payments on their interest-bearing bonds. This deadline for coupon payment has caused financial stress among investors, who have been waiting for an announcement from the company about when they will be paid back.
After a trading suspension was lifted, Evergrande’s share price dropped by 9.9%. This was an enormous drop in the midst of China’s volatile stock market conditions, where investors have been reeling from the lack of trades and information from Chinese companies who refuse to verify rumors or issue statements.
Evergrande Group has reported that they will be selling underwater properties and taking out loans to continue the flow of capital. They announced that they were able to pay back some investors, while delaying others. In addition, Evergrande’s former CEO Xiangjiang Ding has been replaced by Xiao Jianhua.
Evergrande Group is also in pursuit of a potential merger with Grand China. This is the latest in a series of plans to consolidate their company. Evergrande Group has experienced difficulties in recent years, despite being one of China’s largest real estate developers in the past.
Additionally, Evergrande Group has also been involved in multiple disputes with Hainan Airlines over land use for an airport. The dispute was settled in 2013, when both parties agreed to a deal. Evergrande was given land around Hainan’s planned airport which will be used for development.
Both Evergrande Group and Grand China have submitted multiple restructuring plans in order to improve their credit profile, reduce debt, and move into a profitable market. These plans span over the next five years, and include a number of mergers and acquisitions. This is to improve their credit rating, which has been near junk level in recent months.
China Evergrande Group has experience an ongoing crisis due to these financial difficulties. In 2015, they experienced a 10% drop in revenue from the previous year. Also, the company’s interest expenses increased by 10% during the first four months of 2016.
Evergrande Group has over $8 billion USD in debt, which is due for repayment this year alone. They also owe roughly $1.57 billion to Hainan Airlines for leasing land near an airport that they plan on using for commercial development. Hainan has experienced a number of defaults on this lease agreement.
In addition, China Evergrande Group has been facing a cash crunch due to their high debt obligations and low liquidity. In an attempt to combat this, they have announced plans to sell underwater properties and take out more loans from banks. Despite these efforts, their bond prices have increased 50%, and their share price has dropped on the Hong Kong stock exchange.
China Evergrande Group is one of China’s largest developers, and they have been making headlines due to these financial difficulties. Numerous disputes with Hainan Airlines over land usage for an airport led to a 2013 agreement where Evergrande was given land near the planned airport for future development. In order to combat these financial issues, Evergrande plans on selling underwater properties and taking out more loans from banks. Despite these efforts, investors have been waiting on a promise of coupon payments from the company.