Evergrande Plunges On Trading Resumption As Asset Sales Fail To Materialze

China Evergrande Group plunged as much as 12.5% on Wednesday in Hong Kong after shares resumed trading following an almost three-week halt. The developer, in danger of collapsing under $305 billion in total liabilities, hasn’t managed to sell assets to raise proceeds for its mounting liquidity crisis.

In a stock exchange filing published late Wednesday night, Evergrande warns that there is “no guarantee” that it will be able to meet its financial obligations. The company has been trying to offload assets to raise cash, but has made “no material progress” other than the September sale of a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm. 

The bank had demanded at the time all net proceeds be used for settling Evergrande’s liabilities due to the bank. In the meantime, the embattled property developer said in a separate Wednesday filing that sale of a 50.1% stake in its property service unit for $2.6 billion to Hopson Development Holdings failed to go through. The purchaser hadn’t met the prerequisite to make a general offer, according to the filing, which doesn’t offer more detail. Hong Kong-listed Hopson said in its own statement it “regrets to announce” that Evergrande has failed to complete the share sale. 

Evergrande is controlled by billionaire Hui Ka Yan, who once sat perched atop the list of Asia’s richest thanks to a debt-fueled expansion in China’s lucrative property market. Now, his company’s worsening financial crisis has become a matter of global concern. In recent weeks, it has missed interest payments for several dollar-denominated notes. Evergrande reiterated in the filing that there are still 30-day grace periods to make payments, and they haven’t expired. 

Still, the company is running out of options to collect cash. Its contracted sales of properties for September through Oct. 20 – including those sold to suppliers and contractors to settle debt – was a meager 3.65 billion yuan ($571.2 million). The amount constitutes a 97% plunge from contracted property sales of 142 billion yuan in the 38 days from September to Oct.8 last year, underscoring how homebuyers are rapidly losing confidence in the company.

For now, Evergrande is widely expected to enter a prolonged debt-restructuring process. The Chinese government broke its silence on the matter last week. Yi Gang, governor of the central bank, the People’s Bank of China, said in a Sunday meeting of the Group of 30 that the contagion risks Evergrande poses to the overall financial system are “controllable.” The government would, in particular, protect the interests of homebuyers and has confidence to avoid systematic risks