China Evergrande, the troubled property giant that has become a symbol of debt and excess in the world’s second-largest economy, said on Tuesday that it faced “tremendous” financial pressure and had hired restructuring experts to “explore all feasible solutions” for its future.
The company’s fate, however, remains unclear, as it struggles in a country where business troubles often attract the direct attention — and the direct meddling — of Beijing.
Evergrande’s admission that its finances have taken a sharp turn sent its already battered shares down by 12 percent on Tuesday. Its shares have lost more than four-fifths of their value over the past year.
Its foreign-traded bonds plunged, too, leaving global investors in some cases with investments valued at roughly 25 cents to the dollar.
The property developer has become corporate China’s biggest mess. Its fate threatens the property sector and China’s broader financial system, testing the resolve of regulators who are trying to clean up the country’s corporate culture.
Evergrande has been hit with a barrage of negative attention from panicked home buyers and experts warning of an impending default in recent weeks. It owes suppliers, creditors and investors more than $300 billion. Hundreds of its unfinished property developments dot the skyline in cities across the country.
Evergrande’s troubles have cast doubt over China’s property market, one of its most important economic growth engines, but also one that is showing signs of flagging. Shares of other Chinese property developers also fell after Evergrande’s disclosure on Tuesday.
Business & Economy
Sept. 13, 2021, 6:24 p.m. ET
Under pressure from regulators to clean up its finances and cut back its debt, Evergrande has been trying to sell off pieces of its sprawling empire, like an electric vehicle unit and a property management services group.
But on Tuesday, the company said it was “uncertain as to whether the group will be able to consummate any such sale.” It blamed coverage in the media for its troubles, saying that “the ongoing negative media reports” had scared off home buyers and would result in disappointing sales this month that will put pressure on its cash flow.
China Evergrande’s fate could eventually lie in the hands of the Chinese government.
Ratings firms have warned that the company is in big danger of defaulting on its loans and other obligations. Yet more than other major countries, Beijing keeps its financial system under a firm hand and can stave off creditors, at least for a while. The central government controls China’s biggest banks and financial institutions and strictly limits flows of money across its border.
The authorities have stepped in when previous companies have stumbled. Three years ago Beijing seized control of Anbang Insurance Group, which owned a vast overseas empire that included the Waldorf-Astoria hotel in Manhattan. The authorities had detained its chairman months before, and he was later sent to prison for fraud.
Early last year, local government officials stepped in to seize control of HNA, a transportation and logistics conglomerate saddled with debt from expensive overseas acquisitions. Under their guidance, the troubled company was pushed into administration.
Until recently, Evergrande tried to strike a more positive tone, even as experts have warned that the developer was inching closer to a default.
As rumors swirled online about an imminent bankruptcy and plans to lay off most of its employees, Evergrande on Monday issued a denial and said it was “resolutely fulfilling its corporate responsibility.’
“The rumors about Evergrande’s bankruptcy and restructuring that appeared on the internet recently are totally untrue,” the company said on Monday night.