Evergrande suffers US$2.2 billion market beating as stock plunges 79%, testing creditors in debt workout plan

China Evergrande Group plunged in Hong Kong when trading resumed after a 17-month trading suspension, lopping off US$2.4 billion from its market value as investors rushed for the exit amid a debt restructuring by the world’s most indebted property developer.

Evergrande’s shares tumbled 79 per cent to 35 HK cents, versus the pre-suspension price of HK$1.65 on March 21 last year. The slump erased HK$17.2 billion (US$2.2 billion) from its capitalisation. The stock earlier sank by as much as 87 per cent to 22 HK cents.

In its application to lift its trading suspension, Evergrande said it had fulfilled all seven conditions to rescind an order suspending trading in its shares.

“The company has sufficient business operations,” it said in a filing to the Hong Kong stock exchange. “The company places priority on stabilising operations and resolving risks, and pushes forward with utmost efforts in ensuring the delivery of properties,” adding that it has resumed work on 732 projects and delivered 301,000 homes in 2022.

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The developer still faces winding-up petitions in courts in Hong Kong, the Cayman Islands and the British Virgin Islands, but Evergrande said it has “been actively pursuing legal measures to resolutely oppose” these and is “taking all necessary actions to protect its legal rights”.

China Evergrande posted a net loss of 476 billion yuan (US$65.2 billion) for 2021, and of 105.9 billion yuan for 2022, according to its filings last month. The filing of annual reports was one of the requirements under the listing rules for the resumption of trading.

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Other concerns raised by PwC, Evergrande’s former auditor, such as an assessment of the group’s going concerns for 2021 and a 12-month cash flow forecast made in January 2022, were still current, the developer said.

Its new auditor Prism Hong Kong and Shanghai also said that it was unable to obtain sufficient evidence to prove Evergrande’s ability to continue as a going concern, as the forecast was based on certain assumptions “that involve significant uncertainties.”

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Meetings for creditors to vote on Evergrande’s offshore debt restructuring plan had been due to take place on Monday but were postponed until September 26, according to a stock exchange filing on Monday evening.

The proposal is a key step in a protracted process to finalise a blueprint for what would be one of the country’s biggest restructurings ever.

Evergrande sought Chapter 15 bankruptcy protection in New York, a move if granted would protect it from creditors in the US while it works on a restructuring deal elsewhere, according to the news report.

South China Morning Post