Evergrande: Could it be the end of the road for the world’s most indebted property developer, as US$37 billion bill comes due?

Name: Unpaid by Evergrande, supplier sells car and home to rescue his business
Uploaded: 2021-10-02T00:15:12.000Z
Duration: 2 min 25 s
Description: Unpaid by Evergrande, supplier sells car and home to rescue his business

There is mounting fear about developer’s ability to repay piling debt against the backdrop of muted property sales and efforts by Beijing to rein in the property sector

The company ‘is no longer a viable business’, say TS Lombard analysts

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Even without considering any expenses for marketing or human resources, Evergrande would not have enough finished property projects in its entire portfolio to generate the cash that can meet its financial obligations. Illustration by Lau Ka-kuen

Chad BrayandPearl Liu

Published: 8:15am, 2 Oct 2021Updated: 7:32pm, 4 Oct 2021

The second of a three-part series on China Evergrande Group takes a deep dive into the property developer’s total debt to see whether it can escape its liquidity crisis through property and asset sales.

China Evergrande Group, the world’s most indebted property developer, is facing a final notice after engaging in a years-long spending spree to construct a sprawling empire spanning everything from theme parks to electric vehicles (EVs).

The Shenzhen-based company, which at one point unsuccessfully employed martial-arts star Jackie Chan as a pitchman for its mineral water brand, tapped the bond markets nearly 40 times in a four-year period and amassed hundreds of billions of yuan in bank loans as it sought to expand its core residential housing business and diversify the scope of its operations – even as its total liabilities exceeded US$300 billion.

But, the bill for that largesse is coming due, as fears are rising about its ability to repay its cascading pile of debt against the backdrop of muted property sales in mainland China and efforts by Beijing to rein in the property sector in the past year.

The developer’s property portfolio had 144 billion yuan (US$22.3 billion) worth of completed apartments, houses, commercial and retail spaces ready for sale as of June 30. But Evergrande faces a mountain of short-term borrowings, from bank loans to offshore bonds, totalling about 240 billion yuan, due by the end of June in 2022.

That means, even without considering any expenses for marketing or human resources, Evergrande would not have enough finished property projects in its entire portfolio to generate the cash that can meet its financial obligations. It may need to dig into the family treasures within its 2.7 trillion yuan of total assets. Potential avenues for capital raising it could tap to avoid going under include its HK$29.5 billion (US$3.8 billion) Hong Kong-listed EV unit, its stake in China’s most valuable football club – and even founder Hui Ka-yan’s US$60 million superyacht.

02:25

Unpaid by Evergrande, supplier sells car and home to rescue his business

SCMP Series

Is Evergrande too big to fail?

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