The most-indebted real estate developer in the world is struggling to avoid the worst-case scenario. Shares of China Evergrande Group fell 12% to an 11-year low on Monday after the company said there was no guarantee it would have enough funds to meet debt repayments. The company’s announcement had a tremendous impact on its shares.
Its stock dropped more than 12% to HK$1.98, its lowest since May 2010.
China Evergrande’s shares dropped as a 30-day grace period on coupon payment of $82.5 million due on November 6 comes to an end on Monday.
China Evergrande Group is grappling with more than $300 billion in liabilities. So, a collapse could send shockwaves through the country’s property sector.
The company’s problems
The world’s most indebted developer also said it received a demand from creditors to pay about $260 million. Unsurprisingly, that prompted the government of Guangdong province to summon the company’s chairman Hui Ka Yan. He founded Evergrande, formerly known as the Hengda Group in 1996, in Guangzhou, southern China. As of November 2021, China Evergrande Group owns more than 1,300 projects in more than 280 cities across the country.
The government of Guangdong province is closely monitoring China Evergrande’s problems. The government later said in a statement it would send a working group to the developer at Evergrande’s request. The group will help China Evergrande deal with risk management and other issues.
The country’s central bank, banking, and insurance regulator and its securities regulator stated that the situation is under control. Let’s have a look at the position of the People’s Bank of China. According to the central bank, short-term risks caused by a single real estate firm will not undermine market fundraising in the medium and long term.