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China Evergrande Group
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Evergrande crisis: work resumes on 10 projects as developer restores calm, buys time to repay more creditors

  • Company says in WeChat post that projects in six mainland cities have restarted and pledges to fulfil its responsibility to homebuyers
  • Homebuyers, creditors may have seen ‘a ray of hope’ but Evergrande faces more repayment tests ahead, consultant says

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Evergrande is buying some time to restore some of its affected projects soon after paying an interest to offshore bondholders last week. Photo: Reuters
Daniel Renin Shanghai
China Evergrande said it has restarted work on more than 10 projects across six mainland cities, trying to portray some semblance of stability in its operations soon after averting a potentially calamitous default on its offshore debt.

The developer, saddled with 1.97 trillion yuan (US$308.5 billion) of liabilities, identified the projects in Shenzhen, Dongguan, Jiangmen, Shanwei, Zhuhai, and Zhongshan with photos of buildings and workers at construction sites in a statement posted on its WeChat social media account.

The group will shoulder the social responsibility and ensure completion of the buildings, according to the statement, saying it will “make an all-out effort to comply with the governments’ requirements.”

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World’s most indebted developer, China Evergrande Group, buys time to repay more creditors

World’s most indebted developer, China Evergrande Group, buys time to repay more creditors

Evergrande had land reserves covering 778 projects in 233 cities across China as of June 30, according to its latest interim report. Some of them had been suspended because of its failure to pay suppliers and contractors, a crisis that shook the industry and investors in Chinese offshore property stocks and bonds.

“The statement aimed to trigger an upbeat mood about Evergrande’s outlook,” said Ding Haifeng, a consultant at Shanghai-based financial advisory firm Integrity. “Its homebuyers, creditors and shareholders may have seen a ray of hope after the project resumption but the company will still be struggling with upcoming default tests.”

As confidence in the company waned, Evergrande’s contracted sales crashed. It generated only 3.65 billion yuan in September, according to an exchange filing on October 20, versus 38.1 billion yuan in August. That marked the worst month since February 2012. Sales in the quarter amounted to 85.5 billion yuan, the lowest since the April-to-June period in 2016.
The property sector is a key pillar in the Chinese economy, contributing about one-fifth to the gross domestic product. Evergrande’s financial health is being monitored for signs of deeper distress as China continues to tighten the screws on leverage to control financial risk in a weakening economy.
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