The Chinese property developer Evergrande missed yet another payment before promising to repay their investors. This is another one in a line of payments the company missed in the last quarter of 2021, after many failed attempts at acquiring funds.
The China Evergrande Group are renowned as the world’s most indebted property developer, and anyone involved in day trading has stopped looking to them since long. The group suspended their Hong Kong shares as of Monday January 3rd without further information. The firm owes over 300 billion USD debt, $20 billions of which is due to international market bonds.
Evergrande, which was founded in 1996, was part of the Chinese real estate boom which tied 75 percent of household wealth to housing. Today the company have close to 800 unfinished projects across the country, and 1.6 million people have paid for apartments which aren’t available. As of December 2021, Evergrande has created a joint risk committee with government officials to restructure the company and repay the debt.
Forced to demolish Hainan resort apartments
Furthermore, the company has been told to demolish 39 of its buildings in the massive Ocean Flower project in Hainan. The news of the Hainan buildings come amongst allegations that several of the building permits were illegally obtained. The Southern Hainan province authorities are demanding that the Evergrande Group demolishes 39 buildings in 10 days in their Ocean Flower island resort
Employee loans and unfinished apartments drive down share values by 80%
The company, which has earlier tried to repay debts with unfinished apartment complexes, made the future look slightly brighter when the company announced they would finish 39,000 buildings before the end of 2021. However, the missed international payment the next day killed whatever shares were gained the day before. The firm quickly regrouped by announcing they would be paying every investor 8 000 yuan, or 1257 USD, every month for the first quarter of 2022.
The Group has also previously attempted to repay debt by lending money from their employees. In September of 2021, 80 percent of the employees were told that they had to choose between receiving their annual bonus and lend the company money to help fund operations. Many complied, but as the company suddenly stopped paying the loans back, the employees joined home buyers in protests. The event likely aided in decreasing the value of shares in the company by 80 percent.
The Great Wall of property development debt
The Evergrande Group leads the Chinese liquidity crisis among property developers that began last year. The sector must repay almost $20 billions to USD-denominated offshore debt in the first quarter of 2022 alone. The debt extends to local groups as well, such as construction workers who are due 172 billion USD before the start of February.
In 2021, eleven Chinese property developers defaulted on bond payments, and the authorities seem unlikely to step in and bail them out. The crisis could potentially affect the entirety of China’s economy and affect up to 3.8 million jobs.
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