China Evergrande: crisis crimps home sales to 7 per cent of annual takings while creditors await repayment

Evergrande generated 29.12 billion yuan (US$4.2 billion) in sales from January to November, less than 7 per cent of its pre-crisis takings

Developer fends off creditors again as a long-awaited debt workout plan remains elusive because of a wide difference between assets and recovery value

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Signage for the China Evergrande Group outside the Royal Peak residential development in Beijing. Photo: Bloomberg

Published: 3:41pm, 21 Dec 2022Updated: 5:49pm, 21 Dec 2022

China Evergrande Group will end the year with new home sales of about 5 to 7 per cent of its annual levels before a cash crunch plunged the developer into a crisis that threatened its survival. A debt restructuring plan promised to offshore creditors remained elusive.

The home builder generated 29.12 billion yuan (US$4.2 billion) in contracted sales from January to November, according to a stock exchange filing late on Tuesday, involving 3.52 million square metres. In all, Evergrande delivered 256,000 units to customers during the 11-month period.

At this rate, the Shenzhen-based developer will finish a horrible year trailing its lofty targets set by founder and chairman Hui Ka-yan. It generated 723 billion yuan in 2020 before a debt crunch crimped last year’s volume to 443 billion yuan as creditors demanded repayment and homebuyers shunned its projects.

Chairman and founder Hui Ka-yan in a November 2017 file picture. Photo: Getty Images CREDIT: GETTY IMAGES

The slump showcases the extent of Hui’s troubles in steadying his flagship entity, once China’s biggest developer by sales. The developer racked up almost 2 trillion yuan of liabilities by mid-2021 with some of the most ambitious ideas, including a Versailles-like project in Hong Kong, the world’s biggest football stadium in southern Guangdong province and sunk large sums of capital into a plant to produce new-energy vehicles.

Beijing’s “three red lines” since August 2020 has since sent almost 40 cash-strapped industry peers into an existential crisis. Evergrande’s stock has lost 95 per cent in value since tumbling from its peak of HK$31.55 in October 2017, erasing about US$50 billion of capitalisation. The stock last traded at HK$1.65 when it was halted on March 18 this year.

Evergrande has attempted to garner the support of numerous construction companies and material suppliers, according to its filing on Tuesday, and has basically resumed work on 631 pre-sold and undelivered projects. A debt restructuring plan, amid asset sales, remains a work in progress, it added.

“The differences between the parties on the framework and key provision of the restructuring plan are narrowing,” the company said. However, due to its substantial liabilities, “there is significant uncertainty as to whether the resources for debt repayment can generate the expected value,” it added.