Evergrande to work on US$260 million of debt obligation under state supervision as it runs out of cash
- Billionaire Hui Ka-yan, the controlling shareholder of China Evergrande, has been summoned by the Guangdong government to discuss his company’s liquidity crisis
- ‘There is no guarantee that the group will have sufficient funds to continue to perform its financial obligations’, developer says in late exchange filing
The Shenzhen-based company said it and its financial and legal advisers had been evaluating all available options and maintaining ongoing dialogue with offshore creditors to find a way out of its liquidity crisis.
Chinese billionaire Hui Ka-yan, the controlling shareholder of China Evergrande, has been summoned by the Guangdong government to discuss his company’s liquidity crisis. The government has set up a working group for the company.
“The Guangdong government is highly concerned about China Evergrande’s announcement,” the government said in a statement posted on its website.
“Per the company’s request … the government has agreed to send a working group to the company to supervise its risk management, strengthen its internal controls and to maintain normal operations.”
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This would help reduce risks, protect different parties’ interests and maintain social stability, it added.
China Evergrande, which avoided default last month with last-minute overdue interest payments, said it had received a demand to perform its obligations under a guarantee amounting to US$260 million. It said it could not be sure it could satisfy the demand.
“In the event that the group is unable to meet its guarantee obligations or certain other financial obligations, it may lead to creditors demanding acceleration of repayment,” it said in a filing to Hong Kong’s stock exchange late on Friday.
“In light of the current liquidity status of the group, there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations.”
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“We have noticed that China Evergrande has failed to meet its guarantee obligation in an offshore bond. We believe onshore and offshore regulators will deal with this matter fairly, according to the law,” said a spokesman for the China Banking and Insurance Regulatory Commission.
“At this stage, the focus is to meet the mortgage demand of first-time property purchases and home upgrades. Financial institutions should provide a reasonable level of financing to support property development, asset acquisitions and social rental housing,” he added.
“Given the liquidity issues faced by the group, there is no guarantee that the group will be able to meet its financial obligations under its other offshore financing arrangements, as and when they fall due,” Aoyuan said in a filing to Hong Kong’s stock exchange late on Thursday.
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“If the group is unable to meet its obligations to repay any debt when due or to agree with its relevant creditors on the renewal or extension of its borrowings or alternative arrangements, there may be a material adverse effect on the group’s business, prospects, financial condition and operating results.”
In the past few weeks, Aoyuan has received two downgrades from Standard & Poor’s and Moody’s, and three downgrades from Fitch.
“Such ratings downgrades have led to the occurrence of certain trigger events under certain offshore financing arrangements, under which the company and or members of the group are a borrower or a guarantor,” Aoyuan said in the filing.
As a result of the downgrades, creditors have demanded payment of debt worth US$651.2 million, for which it was either the borrower or guarantor.
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Aoyuan said it has not met the demands, and has not reached any agreement on alternative payment arrangements with the lenders, after trying to resolve the difficult situation “consensually and amicably and within a reasonable time frame”.
The company has two big deadlines looming – a US$188 million maturity on a 4.2 per cent dollar bond due on January 20, and three days later a US$400 million maturity on an 8.5 per cent dollar bond.
It said last month that it had hired Admiralty Harbour Capital as a financial adviser and Linklaters as a legal adviser to assess its capital structure, financial condition and debt and liquidity profile.
Its stock has dived around 80 per cent since Beijing imposed the debt caps on the sector in August last year.
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Separately, a proposal by Kaisa Group to exchange a US$400 million Singapore-listed bond with a new one with an extended maturity failed to gain sufficient support from bondholders, the firm said in a filing to Hong Kong’s bourse on Friday.
The offer, which expired on Thursday, was floated in an effort to relieve its liquidity crisis and give management more time to restructure its debt.
With the bond due for repayment on December 7, Kaisa said it will explore solutions, including renewing and extending its loans and selling assets to meet its obligation.
“If the company is unable to repay the existing notes at its maturity or agree with its holders on alternative arrangements, it would have a material adverse effect on the group’s financial condition,” it said.
Kaisa shares closed 8.8 per cent lower at HK$0.93 on Friday.
