China’s Evergrande Group tumbled 79 percent in Hong Kong trading on Aug. 28 as shares of the real estate developer resumed trading for the first time since its unexplained suspension in March 2022.
Shares listed in Hong Kong fell to HK$0.35, with its market capitalization shrinking to HK$4.6 billion ($586.29 million) from HK$21.8 billion ($2.78 billion) when it last traded.
The company’s Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, have both resumed trading in the past month after a 16-month halt.
The trade resumption is crucial for the company because its offshore debt restructuring plan includes swapping part of the debt into equity-linked instruments backed by them. Evergrande would have been delisted if the suspension had gone beyond 18 months.
The company had about 2.39 trillion yuan ($328 billion) in liabilities in the January-to-June period, lower than the 2.44 trillion yuan ($334 billion) recorded last year. Its total assets also decreased from 1.8 trillion yuan ($247 billion) last year to 1.74 trillion yuan ($239 billion) this year.
Evergrande said that its board has reviewed its cash flow projections and believes that the company “will be able to adequately fund its operations and meet its financial obligations as and when they fall due within the next 12 months from 30 June 2023.”
“In the first half of 2023, China’s property market has cooled down significantly, with sales area of national commodity house falling by 5.3 percent year-on-year. A number of real estate companies defaulted on their debts, further exacerbating the volatility in the market,” it stated.
Bankruptcy Filing in New York
This came just a week after Evergrande filed for bankruptcy in New York on Aug. 17.The filing under Chapter 15 of the U.S. Bankruptcy Code shields non-U.S. companies under restructuring from creditors coming after their U.S.-based assets.
The bankruptcy filing from Evergrande is feeding into growing fears in a country now struggling with a deteriorating real estate market and broader economic turmoil.
Once China’s second-largest homebuilder by sales, Evergrande defaulted in late 2021 with some $300 billion of debt on its back. Companies accounting for 40 percent of Chinese home sales have since defaulted, and Country Garden, another leading Chinese developer, on Aug. 6 missed two dollar-denominated bonds totaling $22.5 million, leaving it with a 30-day grace period before it gets labeled a defaulter.
Evergrande said in a filing that its bankruptcy protection application to the U.S. court is a normal procedure for offshore debt restructuring and doesn’t involve a bankruptcy petition. It clarified that its U.S. dollar-denominated notes are governed by New York law.
