Chinese property giant Evergrande (HK:3333)'s financial woes intensified on Monday as the company lost 25% of its market value in a single day, following an announcement of a delay in a crucial debt restructuring meeting. This marks a further blow to the beleaguered firm that has seen 87% of its market value wiped out in less than a month.
Evergrande, which has been grappling with $300 billion in liabilities since 2021, has struggled to find a solution to its financial crisis. The developer had paused trading indefinitely while attempting to devise a resolution. However, following the announcement of a debt restructuring plan, Evergrande relisted on the Hong Kong Stock Exchange on August 28. Since then, shares have plummeted, trading as low as 41 Hong Kong cents on Monday, effectively rendering it a penny stock.
On the Friday preceding the postponed meeting, Evergrande filed a document with the Hong Kong exchange revealing that its debt restructuring plan needed to be reassessed due to an unsuccessful re-entry into the stock market. The company stated that sales had not met expectations since its March debt restructuring announcement. Consequently, Evergrande considered it necessary to revise the proposed restructuring terms to align with the company's situation and creditor demands.
The company also admitted it was currently unable to meet qualifications for issuing new notes due to an ongoing regulatory probe.
In what has been termed the 'Evergrande contagion', other property developers have also experienced significant share price drops as investors grow increasingly doubtful about Evergrande's ability to recover. The Hang Seng Mainland Properties index slid by more than four percent on Monday. Broader Chinese real estate stocks were down 2.5 percent.
Individual real estate stocks have also suffered. Country Garden plunged 7.69 percent, Logan Group slumped 7.95 percent, and R & F Properties fell 6.62 percent on Monday. Fears are growing that Country Garden, China's largest builder, is nearing default due to its declining value, despite receiving a temporary reprieve last week when Chinese creditors approved an extension on bond repayments.
Earlier this month, the Chinese Communist Party initiated investigations into Evergrande's major figures over allegations of fraud. Over the weekend, Evergrande's wealth management unit in Shenzhen was raided, and several staff members were detained on suspicion of "illegal fundraising", according to the Shenzhen Nanshan District Police Bureau.
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