A new blow aggravates the real estate crisis in China: Evergrande employees were arrested and shares fell again

The logo of China Evergrande Group is seen at its headquarters in Shenzhen, Guangdong province, (REUTERS/Aly Song/File Photo) (ALY SONG/)

The shares of the Chinese real estate giant Evergrande plummeted by about 25% at the opening of Hong Kong markets on Monday, following the arrest of several employees of the indebted company in China.

The share price of Evergrande It fell to $0.47 on Monday at 9 a.m. in Hong Kong (0100 GMT), before rising again, after closing at $0.62 on Friday.

The fall comes two days after police in the southern Chinese city of Shenzhen said in a statement that several employees of Evergrande’s financial subsidiary, Evergrande Wealth Managementhad been arrested.

The authorities did not specify the number of employees or the charges against them.

The statement called on the population to report any case of suspected fraud.

Evergrandewhich was listed again on August 28 after 17 months suspendedwas already under the spotlight in 2021 after it was learned that at least half a dozen employees redeemed wealth management products before the scheduled dates, although they were later reprimanded and forced to return the funds.

On August 18, The company requested the protection of Chapter 15 of the Law of Bankruptcy of the United States with the objective of protecting the assets of the company in the United States, while the restructuring agreements of the company in the United States are managed. Hong Kong and the Cayman Islands.

Evergrandethe most indebted real estate developer in the world, with an estimated debt of $328 billion (€307 billion) at the end of June, has been at the center of the growinge crisis of the Chinese marketswhich raises fears of global contagion.

Beijing considers that the enormous debt of Evergrandeonce a star in a key sector for Chinese economic growth, represents a unacceptable risk for the country’s financial system.

Authorities have gradually restricted developers’ access to credit since 2020and there has been a wave of defaults, especially that of Evergrande.

On Friday, China’s national financial regulator gave the green light to the takeover of Evergrande’s insolvent insurance subsidiary, Evergrande Life Insurance, by the new state-owned venture. Haigang Life Insurance.

New expiration for Country Garden

A construction site of residential buildings by the Chinese developer Country Garden in Tianjin, China (REUTERS/Tingshu Wang)
A construction site of residential buildings by the Chinese developer Country Garden in Tianjin, China (REUTERS/Tingshu Wang) (TINGSHU WANG/)

The other major real estate agency in the Asian country, Country Gardenhas been dragged down by the fall of Evergrande and its shares fell more than 1.8% on the Hong Kong Stock Exchange.

This Monday, the company faced another liquidity test, as must pay 15 million dollars in interest linked to an offshore bond, after having avoided default at the last minute in two occasions this month.

Country Gardenwhose financial problems have worsened the real estate sector’s prospects and prompted a series of support measures from Beijing, will have a 30 day grace period to pay the coupon before it is considered in default.

He 500 million dollar bond at 6.15% matures in September 2025. As of late Monday afternoon, the coupon payment had not been received, said a holder of the bond tranche, who requested anonymity because he was not authorized to speak to the media. communication.

If Country Garden does not pay the coupon before the grace period ends in mid-October, the principal will expire and any breach of service will activate the cross-default conditionssaid Sandra Chow, Asia-Pacific co-head of research at CreditSights.

“It is going to be very difficult” for Country Garden to meet its debt obligations due to falling cash levels at a time when property sales in the world’s second-largest economy remain very weak, Chow said.

Last month, The company warned of the risk of default if its financial results continued to deteriorate. He has debt of 108.7 billion yuan ($14.9 billion) due in 12 months, but he only had about 101 billion yuan in cash as of June.

(With information from AFP, EFE and Reuters)