China’s giant real estate company, Evergrande, may be delisted from the Hong Kong Stock Exchange next month due to its failure to restructure its debt and its entry into liquidation proceedings. This casts a shadow over hopes for debt restructuring in China’s already weak real estate sector.
The Chinese real estate market has failed to revive despite years of contraction and government stimulus measures. Developers are facing serious cash flow problems, while bondholders are unwilling to accept even greater losses. This is delaying debt negotiations.
Evergrande’s shares were suspended following the decision to liquidate on January 29, 2024. The company’s inability to present a viable plan for its $23 billion offshore debt triggered this process. It is expected to be delisted from the stock exchange because it failed to meet the transaction conditions within 18 months. The company’s market capitalization, which peaked at HK$400 billion, fell to HK$2.2 billion on the day of the delisting.
The overall picture in the sector is also bleak. New home prices experienced their fastest decline in the last 8 months in June. Therefore, even firms that previously completed debt restructuring are considering new rounds.
More than $140 billion in real estate bonds have defaulted in China since 2021, and most of them are still in the restructuring phase. Analysts expect a decline of up to 30% in construction activity by 2025. Country Garden, one of the major companies, is seeking approval for a $14 billion loan. Other developers, such as KWG, Agile, Logan, and Powerlong, have yet to reveal their detailed plans. According to consultants, private sector developers, in particular, may have to undergo multiple rounds of debt restructuring unless they can access cash flow. As AlixPartners consultant Una Ge stated: Every company has a different debt structure. However, continuous debt reduction is inevitable for private developers. A one-off restructuring is often insufficient. wp:paragraph –>
