Evergrande, China’s real estate giant facing restructuring following Beijing’s crackdown on excessive borrowing and speculation in this sector, has pledged to pay down its debt this year.
In an email, Chairman Hui Ka Yan told the staff that “2023 is a key year for Evergrande to fulfill its corporate responsibility and do everything possible to ensure the delivery of construction projects.
As long as everyone at Evergrande unites, never gives up and works hard…we will certainly be able to complete the tasks of ensuring delivery, paying off all kinds of debts, and resolving risks,” Hui wrote.
Last year, the company resumed work on 732 projects and delivered 301,000 residential units to homebuyers, according to the message.
Evergrande has been shedding assets in recent months and has been involved in restructuring talks after racking up some $300 billion in liabilities.
The company is the symbol of the crisis of the real estate sector in China, which represents about a quarter of the country’s Gross Domestic Product.
Loss of value
Evergrande is currently strapped for resources against a 2 trillion yuan (about $300 billion) liability that has reduced its stock and bond prices by nearly 80% by the end of 2022.
Evergrande said in December that it risked defaulting on its debt if it could not raise cash. In this sense, analysts say that if Evergrande falls, it will dispel the idea that some Chinese companies are too big to fail. The company has more than 1,300 real estate projects in more than 280 cities.
Evergrande’s financial problems involve big-name global funds such as Amundi, Europe’s largest asset manager, who was Evergrande’s largest holder of international bonds, though he likely sold at least a few before things went bad. .
Other funds also exposed to the Chinese company’s bonds include the world’s largest asset manager BlackRock, as well as Fidelity, Goldman Sachs Asset Management and Pacific Investment Management Company (Pimco).
Some Evergrande debt analysts hope the damage is not too widespread, but other experts remain wary of the broader signal the Chinese giant’s insolvency problem is sending.
“This is part of a self-reinforcing dynamic, where increased default risk triggers the costs of financial distress, which in turn increase default risk,” Michael Pettis, a nonresident principal analyst, tweeted. from the Carnegie-Tsinghua Center for Global Policy.
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