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Evergrande shares fell as much as 87 per cent on Monday after trading in the Chinese property developer’s stock resumed for the first time in almost a year and a half and the company delayed crucial restructuring meetings with creditors.
The world’s most indebted developer over the weekend disclosed first-half losses of Rmb33bn ($4.5bn) in order to partially fulfil Hong Kong stock exchange requirements to lift a 17-month trading suspension. According to exchange rules, a company whose shares have been suspended for 18 months faces possible delisting.
Evergrande, which is entangled in more than 2,000 lawsuits involving about Rmb535bn, delayed for another month meetings with international creditors in Hong Kong, which were expected to lead to a vote on a restructuring plan this week.
Proposals outlined earlier this year aimed to compensate international investors with notes linked to the company’s listed Hong Kong subsidiaries, including its electric vehicle company and a property management business. Those stocks had also recently resumed trading in Hong Kong after long suspensions.
The fate of the meetings was being closely watched for signs of progress across the Chinese property sector, which has been paralysed by inactivity and a lack of funding, as well as for any precedents for future or parallel restructurings.
With total liabilities of more than $300bn, Evergrande has come to embody the sector’s liquidity crisis following the company’s default in 2021. A wider property slowdown has weighed on China’s economic growth for almost two years as dozens of its peers have also defaulted.
Beijing has stopped short of providing direct bailouts or major stimulus, despite renewed fears of spillovers from property into the wider financial system.
Country Garden, once China’s largest private developer by sales, this month missed payments on its international bonds, triggering a 30-day grace period, while Zhongrong, an investment company, missed payments on savings products.
Evergrande, which did not disclose its financial position for 2022 and much of this year, last month said it lost $81bn over 2021 and 2022. Its liabilities now stand at Rmb2.39tn.
As well as revealing financial results, the requirements for its trading resumption include addressing issues raised by its former auditor PwC, which resigned in January. These issues include estimates of off-balance sheet liabilities.
Prism Hong Kong and Shanghai, which replaced PwC as auditor, did not issue a conclusion on the first-half results, citing “multiple uncertainties relating to going concern”.
Evergrande this month filed for Chapter 15 bankruptcy protection in the US.
Regarding its legal cases, Evergrande said on Sunday that “various parties have filed litigation against the Group” over issues including unpaid borrowings, outstanding construction and delayed delivery of several projects.
The company added it was “actively communicating with relevant creditors and seeking various ways to resolve these litigations”.