Evergrande shares in China dip to 11-year low as default risks rise

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

HONG KONG, Sept.20 (Reuters) – Evergrande shares plunged to their lowest level in more than 11 years on Monday, extending losses as executives try to salvage its business outlook and default fears grow over the course of of impending maturity for payment obligations this week.

Evergrande has struggled to raise funds to pay off its many lenders, suppliers and investors, with regulators warning that its $ 305 billion in liabilities could trigger greater risks to the country’s financial system if not stabilized.

The stock closed 10.2% lower at HK $ 2.28, after falling 19% to its lowest level since May 2010.

The company’s property management unit (6666.HK) fell 11.3%, while its electric car unit (0708.HK) fell 2.7%. Evergrande-owned movie streaming company Hengten Net (0136.HK) fell 9.5%.

“The stock will continue to decline, as there is no solution yet that appears to help the company alleviate its liquidity stress, and there are still so many uncertainties about what the company will do in the event. restructuring, ”Kington Lin said. , Managing Director of the Asset Management Department at Canfield Securities Limited.

Lin said Evergrande’s share price could drop below HK $ 1 if the company is forced to sell most of its assets as part of a restructuring.

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

The developer said on Sunday that it had started reimbursing investors for its wealth management products with real estate. Read more

Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers are largely of the view that a direct government bailout is unlikely.

Evergrande is due $ 83.5 million in interest on September 23 for its March 2022 bond. It has another $ 47.5 million interest payment due on September 29 for the March 2024 notes. Both bonds would default if Evergrande does not pay the interest within 30 days of the scheduled payment dates.

In any default scenario, Evergrande will have to restructure bonds, but analysts expect investors to see a low recovery rate. Trading in the company’s bonds underscored how much investor expectations for its outlook have deteriorated this year.

The March 2022 8.25% dollar bond traded at 29.156 Monday afternoon, yielding more than 500%, down from around 13.7% earlier in the year. The 9.5% bond from March 2024 was at 26.4, with a yield above 80%, compared to 14.6% at the start of 2021.

Goldman Sachs said last week that because Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, the paybacks in a potential restructuring could differ between the two sets of bonds, and all potential restructuring process could be prolonged.

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

Shares of Sunac (1918.HK), China’s 4th largest real estate developer, fell 10.5%, while state-backed Greentown China (3900.HK) fell more than 6.7%.

Hong Kong’s Heng Seng Index (.HSI) fell 3.3%.

Reporting by Clare Jim; Editing by Shri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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