China Evergrande Group, once a towering giant in the property development industry, now stands at the brink of collapse. The journey from prosperity to peril has been marked by a series of events that have shaken the global financial landscape. In this comprehensive timeline, we delve into the critical milestones that led to the current predicament of Evergrande, the world’s most indebted property developer.
August, 2021: Construction Halts Amid Overdue Payments
In August 2021, the first tremors of Evergrande’s impending crisis became evident as construction on many of its projects across China ground to a halt. The reason? Overdue payments to suppliers and contractors. This ominous sign of financial distress triggered alarm bells within China’s central bank and banking watchdog, prompting them to summon senior executives for a rare warning. Evergrande was urged to prioritize stability and take swift action to reduce its debt risks.
September, 2021: Missed Bond Payments and Cross-Default Risks
The situation worsened in September 2021 when Evergrande missed two offshore bond coupon payments totaling a staggering $131 million. These missed payments carried a 30-day grace period, during which the company engaged financial advisers to explore potential solutions. Amid plunging property sales and a dearth of new avenues for fundraising, Evergrande warned of the looming threat of cross-default risks.
November, 2021: Chairman Hui Reduces Stake
By November 2021, Evergrande’s founder and chairman, Hui Ka Yan, took drastic measures to address the crisis. He sold 1.2 billion shares, worth HK$2.68 billion ($342.7 million), reducing his stake in the company from 77% to 67.9%. This move aimed to inject much-needed liquidity into the struggling developer.
March, 2022: Share Suspension and Property Management Arm Investigation
Evergrande’s woes continued to mount in March 2022 when the company suspended trading in its shares. The stated reason was the inability to publish audited financial results before March 31. Additionally, an investigation into the property management arm revealed that banks had seized 13.4 billion yuan in deposits, further denting Evergrande’s already tarnished reputation.
November, 2022: Mansion Seized in Prestigious Enclave
In a symbolic blow to Evergrande’s fortunes, November 2022 saw the seizure of a mansion belonging to Chairman Hui Ka Yan in Hong Kong’s prestigious The Peak residential enclave. The lender, China Construction Bank (Asia), took this drastic step as Evergrande’s financial situation continued to deteriorate.
December, 2022: Resumption of Work on Pre-Sold Projects
Desperate to regain some semblance of control, Evergrande announced in December 2022 that it had resumed work on 631 pre-sold and undelivered projects. This move was seen as an attempt to reassure homebuyers and regain investor confidence.
January, 2023: Auditor Resignation and Independent Committee Findings
Evergrande faced another setback in January 2023 when its auditor, PricewaterhouseCoopers, resigned due to disagreements over matters related to the audit of the company’s 2021 accounts. Simultaneously, an independent committee found that Evergrande’s directors had fallen “below standards” due to their involvement in diverting loans secured by unit Evergrande Property Services.
March, 2023: Restructuring Plans and Creditor Support
With the walls closing in, Evergrande announced plans for the restructuring of its offshore debt in March 2023. The proposal offered creditors a range of options to swap their debt into new bonds and equity-linked instruments backed by the group and its two Hong Kong-listed companies. In April, Evergrande reported that 77% of class-A debt holders and 30% of class-C debt holders had submitted their support for the restructuring proposal.
July, 2023: Staggering Losses and U.S. Bankruptcy Protection
The gravity of Evergrande’s financial turmoil became painfully evident in July 2023 when the company reported staggering net losses of 476 billion yuan and 105.9 billion yuan for 2021 and 2022, respectively. This was a stark contrast to the 8.1 billion yuan net profit recorded in 2020 when the company was still operating normally.
In August 2023, Evergrande made a pivotal decision to seek protection under Chapter 15 of the U.S. bankruptcy code. This legal maneuver aimed to shield the company from creditors seeking to sue it or tie up its assets in the United States. Simultaneously, Evergrande reported a 33 billion yuan loss for the first half of 2023, a marginally improved figure compared to the 66.4 billion yuan loss during the same period in the previous year. The resumption of trading in Evergrande’s shares after 17 months reflected a 79% loss in market value since its last trade.
September, 2023: State-Owned Insurer and Deferred Scheme Meeting
September 2023 brought new developments as China’s National Administration of Financial Regulation approved the setup of a state-owned insurer to take over all assets and liabilities of Evergrande Life Insurance, a 50%-owned investee company of Evergrande.
Meanwhile, police in southern China detained some staff at Evergrande Financial Wealth Management, an indirect wholly-owned subsidiary of Evergrande. The company also deferred a scheme meeting initially scheduled for late September, citing the need to reassess the terms of the proposed restructuring. Further complicating matters, Evergrande announced its inability to meet qualifications for the issuance of new notes, as its flagship onshore unit, Hengda Real Estate Group, was under investigation by the Chinese securities regulator for suspected violation of information disclosure.
In a final ominous note, a major group of offshore creditors threatened to join a court petition to liquidate Evergrande if the company failed to submit a new debt revamp plan by the next month.
Conclusion:
The unraveling of China Evergrande Group has been nothing short of a financial epic, with far-reaching implications for global markets. From its meteoric rise to the pinnacle of the property development industry to its precipitous fall into insurmountable debt, Evergrande’s crisis is a cautionary tale of excessive leverage and unchecked expansion. As the company navigates the treacherous waters of restructuring and bankruptcy protection, the world watches with bated breath, wondering what the future holds for this once-mighty giant.
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