Image source,Reuters
After a stalemate in the protests for a whole day, Evergrande Shenzhen headquarters dispatched security guards to block the entrance and drive away the media.
After being surrounded by investors to protest against the headquarters of China Evergrande Group, it admitted that it was facing “unprecedented difficulties” and stated that this was caused by “continuous negative news reports on the group.”
Evergrande Group submitted an announcement to the Hong Kong Stock Exchange on Tuesday (September 14), confirming that the group’s property sales performance in the past three months has continued to deteriorate, and has hired financial consultants to study solutions. The group denied in a separate statement that it is undergoing bankruptcy and reorganization. The relevant stocks of Evergrande Group listed in Hong Kong generally plummeted that day. Among them, China Evergrande closed down 11.87% on Tuesday, Evergrande Automobile fell 24.66%, and Evergrande Property fell 12.01%.
About 100 investors surrounded Evergrande’s headquarters building in Shenzhen, Guangdong on Monday (13th). Some people claimed to have purchased Evergrande’s investment products and demanded redemption. Related photos are circulating on Chinese social media, but the mainstream media has not reported the incident.
Evergrande announced its financial report for the first half of 2021 two weeks ago, confirming that its total liabilities were as high as 1.9665 trillion yuan (305.07 billion U.S. dollars). Analysts worry that Evergrande’s debt problems pose risks to the entire Chinese financial system.
On September 13, nearly a hundred investors protested at the headquarters of China Evergrande Group in Shenzhen, demanding repayment of loans and cashing in financial products, and everyone was emotional.
What happened to Evergrande headquarters?
Many of the debt collectors who besieged the headquarters of the Evergrande Group in Nanshan District, Shenzhen on Monday were emotional. Seen from the video taken by Reuters TV News, they shouted slogans such as “Hengda pay back”. China Caixin reported that the demonstrators had begun to gather on the evening of Sunday (12th), “investors took offline actions, and participants included Evergrande Wealth’s own employees.”
Some photos circulated on the Internet show that some demonstrators hold or put placards on their chests such as “Hengda pays back my hard-earned money” and “The boss is full of money, and the employees are bankrupt.”
According to reports, the target of the demonstrators is Du Liang, executive director and general manager of Evergrande Wealth, a subsidiary of Evergrande Group. In the early hours of Monday morning, he read out a payment plan to the people who besieged the headquarters of Evergrande. According to Caixin.com, Du Liang mentioned that it is difficult for Evergrande to allocate 40 billion yuan to redeem mature wealth management products in an instant.
Image source,Reuters
Du Liang (middle), executive director and general manager of Evergrande Wealth, sat slumped beside a woman who fainted. According to reports, he has been negotiating with the protesters at the scene.
A Mr. Wang who claimed to be an employee of Evergrande told Reuters that he personally invested 100,000 yuan and his relatives invested a total of 1 million yuan. “They said it would take two years to complete the payment, but there is no real guarantee. I am worried that the company will go bankrupt by the end of the year.”
Caixin reported that a man believed to be Du Liang stayed on the ground floor of the Evergrande headquarters until Monday. He slumped under a wall, looking exhausted. Later, dozens of security guards dispersed to interview reporters and kept the crowd outside. The man also appeared in the video taken by Reuters.
According to Agence France-Presse, the protests at the Shenzhen headquarters of Evergrande continued on Tuesday, and some contractors who were in arrears in payment joined the demonstrators. According to the information disclosure website “Free Weibo”, a number of posts discussing the demonstration at Evergrande headquarters were censored and blocked.
Capital Economics, an investment research company headquartered in London, UK, estimates that as of the end of June 2021, Evergrande is undertaking the construction of 1.4 million commercial housing units with a total value of 1.3 trillion yuan (approximately US$200 billion).
What’s the official statement of Evergrande?
“The company has indeed encountered unprecedented difficulties, but the company resolutely fulfills its corporate responsibility, goes all out to resume work and production, guarantee the delivery of buildings, do everything possible to resume normal operations, and fully protect the legitimate rights and interests of customers.”
By Tuesday, Evergrande Group submitted an announcement to the Hong Kong Stock Exchange in the name of Chairman Xu Jiayin. It did not mention the rumor of bankruptcy and reorganization, but first admitted that its property contract (real estate contract) sales have been on a downward trend since June 2021. It is expected that 9 The month will also “continue to fall sharply.”
The announcement stated: “September is usually the peak of property contract sales in China’s real estate industry. However, due to the continued negative news reports on the Group that have seriously affected the confidence of potential home buyers, the company expects that September sales will continue to fall sharply, resulting in the continued deterioration of the Group’s sales collection. , Further exerting tremendous pressure on cash flow and liquidity.”
Image source,Reuters
Xu Jiayin founded Evergrande in 1996.
Image source,Reuters
The China Evergrande Center in Wanchai, Hong Kong, is one of the properties that Evergrande Group is trying to sell off.
The announcement continued that Evergrande Group “is actively approaching potential investors” to sell assets, including certain shares of Evergrande New Energy Automobile and Evergrande Property, as well as the office building of China Evergrande Center in Wanchai, Hong Kong. It also confirmed that Evergrande’s two The subsidiary failed to fulfill the “guarantee obligation provided for the issuance of wealth management products by third parties,” involving debts of RMB 934 million.
Evergrande Group announced the appointment of two financial consultants to “explore all feasible solutions to alleviate the current liquidity problem, and strive to complete the best solution for all stakeholders as soon as possible.”
Capital Macros’ chief Asian economist, Mark Williams, told AFP: “The fall of Evergrande will be the biggest test that China’s financial system will face in many years.”
Williams said that the best way out of Evergrande’s endgame is to let other real estate developers take over Evergrande’s uncompleted projects and allow Evergrande to repay the debt with land from its land bank.
Evergrande and the “Three Red Lines”
Xu Jiayin founded Evergrande in 1996, and the subsequent real estate boom enabled the group’s business to develop rapidly in major cities in China. In 2009, Evergrande made its IPO in Hong Kong and successfully raised US$9 billion.
In 2010, Xu Jiayin acquired a football club in Guangzhou, changed its name to Guangzhou Evergrande, and spent a lot of money to attract players to join. Since then, he has repeatedly achieved good results. In 2021, the Chinese Football Association required the team to divest the corporate name and renamed the Guangzhou team again.
In 2018, Evergrande launched its new energy vehicle business through external mergers and acquisitions of its subsidiaries. In August 2020, it announced the first batch of concept cars, but they have not yet been listed. On September 3, Evergrande announced that its new energy vehicles had just completed a new round of testing.
In terms of finance, Evergrande Group owns Evergrande Financial Wealth, which is “based on wealth management consulting and characterized by community finance”, and Evergrande Life, which was renamed after Evergrande Group acquired 50% equity of Sino-Singapore Oriental Life Insurance Co., Ltd. .
Image source,Feature China/Barcroft Media/Getty Images
The new energy vehicles designed by Evergrande have not yet reached the stage of production.
Image source,AFP
According to estimates, Evergrande has to deliver 1.4 million commercial housing units with a total value of 1.3 trillion yuan.
On August 20, 2020, the People’s Bank of China and the Ministry of Housing and Urban-Rural Development held a symposium on key real estate companies in Beijing to delineate the “three red lines” for real estate financing, that is, the asset-liability ratio after excluding advance receipts is greater than 70%, and the net debt The ratio is greater than 100%, and the cash short-term debt ratio is less than double. When the “three red lines” are all touched, the enterprise is not allowed to raise funds. In this context, Evergrande was forced to cut prices and sell properties.
SinoInsider, an American consulting firm, believes that the Beijing authorities “will not let Evergrande go bankrupt,” but Capital Investment’s Williams believes that Evergrande has become “a model of over-leverage” and Chinese policymakers are eager to control it. Therefore, the Chinese government cannot rescue Evergrande.
James Shi, a non-performing debt analyst at Reorg, a financial analysis company, commented to Reuters that Evergrande’s announcement represents its first step in restructuring, which usually involves delays in interest payments, waivers, and even bond valuation discounts and deferred payment. . Only if the reorganization fails, will it fall into bankruptcy.