China Evergrande shares plunge to 11-year lows on risk of default

An exterior view of the China Evergrande Center in Hong Kong, China March 26, 2018. REUTERS / Bobby Yip / File Photo

HONG KONG, Sep 20 (Reuters) – Evergrande’s shares plunged up to 19% on Monday to their lowest level in over 11 years, extending losses as investors tightened their business prospects with a rapidly approaching deadline for payment obligations assess this week gloomy.

By noon, the stock had hit HK $ 2.06, its lowest level since May 2010.

The property management unit of the company (6666.HK) decreased by over 12% while the electric car unit (0708.HK) 8% decreased. Film streaming company Hengten Net (0136.HK), which is majority owned by Evergrande, slumped 14%.

Evergrande has struggled to raise funds to pay its many lenders, suppliers, and investors, with regulators warning that its $ 305 billion debt could pose greater risks to the country’s financial system if it doesn’t stabilize will.

One of Evergrande’s main lenders has set aside provisions for losses on some of its loans to the contested developer, while some creditors plan to give it more time to repay, four bank executives told Reuters. Continue reading

The developer said on Sunday that it had started repaying investors in its wealth management products with real estate. Continue reading

Policy makers are urging Evergrande’s top lenders to extend interest payments or rollover loans, and market observers broadly believe that a direct government bailout is unlikely.

Evergrande is due to pay $ 83.5 million in interest on September 23 on its March 2022 bond. Additional interest payments of $ 47.5 million are due on September 29 for the March 2024 Notes. Both bonds would default if Evergrande did not pay the interest within 30 days of the due dates.

In any default scenario, Evergrande has to restructure its bonds, but analysts expect a low recovery ratio for investors.

Goldman Sachs said last week that due to the fact that Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, the recoveries in potential restructuring between the two bonds could be different and any potential restructuring process could be extended.

The company’s worries also put pressure on the broader real estate sector as well as the yuan, which fell to a three-week low of 6.4831 per dollar in offshore trading.

Sunac shares (1918.HK), China’s No. 4 real estate developer, fell over 10% while state-backed Greentown China (3900.HK) lost over 9%.

Hong Kong’s Heng Seng Index (.HSI) was down by over 4%.

Reporting from Clare Jim; Editing by Shri Navratnam

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