Embattled Chinese property developer Evergrade has won an extension until late January to restructure its substantial debts to avert liquidation amidst China’s ongoing property crisis.
Hong Kong courts initially gave Evergrande (HK:3333) until today to present a concrete debt-restructuring plan to its offshore creditors, after the initial plan to distribute equity stakes in its various subsidiaries failed to cut the mustard.
The company is at risk of being liquidated following a winding-up petition by creditor Top Shine Global. This action, if successful, would transfer control of Evergrande to liquidators tasked with selling assets to repay lenders.
Evergrande is the most indebted property company on the planet, with some $300 billion (£237 billion) in liabilities on its books.
Its woes started in 2021, when the communist party imposed stricter leverage requirements as part of its ‘Three Red Lines’ rule, thus limiting Evergrade’s access to funding.
Since the vast majority of Evergrande’s portfolio consists of incomplete developments, this has led to indefinite delays of its past vast portfolio of residential and commercial developments across China.
Evergrande has faced protests from existing customers and a withdrawal of demand due to fears of their houses never being completed.
Evergrande’s woes are a symptom is a wider crisis in China’s massive real estate market.
Following decades of substantial growth in property prices, China is awash with incomplete developments left to crumble after speculative property investments turned sour and construction ground to a halt.
The BBC estimates that Evergrande had up to 1.5 million unfinished homes in its portfolio in September 2021, when China’s real estate crisis was beginning to attract international attention.
Comprising more than a quarter of gross domestic product, China’s property market is one of the world’s largest asset classes and is considered a proxy for the country’s economy as a whole.
Property is also intrinsically linked to individual wealth, comprising a remarkable 70% of household wealth.
So it came as a major concern when China’s other major property developer Country Garden missed a $15 million interest call on its debts in August. The group is now considered in default on its overseas bonds.
As hundreds of thousands of properties across China remain unfinished, would-be homeowners have seen their life savings trapped in deposits for houses they may never see the inside of.