Liquid problems in Evergrande: the reason why the manufacturer faces a constant risk

Updates of Evergrande Real Estate Group Ltd

Advertisers are facing a growing possibility that Evergrande will collapse, which could happen in global markets and highlight the dangers of China’s large economic sector.

The global debtor said last week It may fail to repay its debts, creating fear among investors, which in turn damages its bonds and leads to bankruptcy. suspension of trade in Shenzhen and Shanghai.

On Wednesday, Fitch became the most recent warning group, reducing Evergrande’s foreign currency from C three to C two and that a shortfall of some kind “seems possible”. This week, Mr Moody’s sacked the company for the third time in a few months, saying that debtors “have a weak hope” if they fail to repay.

The economic crisis has left some Evergrande businesses at less than 30 cents a dollar – which is at a critical juncture – and highlighted the fears of the real estate market, which accounts for more than 28% of China’s economy.

Why does Evergrande fail?

Evergrande establishes real estate services and sells their homes to their clients pay in advance before you finish. It has 778 operations taking place in 223 cities.

Evergrande payments to suppliers often depend on the availability of business loans, a temporary IOU type.

Last week, the company said the financial crisis, including delays in payment to suppliers and bills, meant that jobs were being suspended. I am rush to sell goods to make money but some companies refused to accept Evergrande’s sales paper. S&P has suggested that the developer may be paying for their services through the transfer of their goods instead of cash.

Evergrande faces the worst-case scenario that does not have enough money to complete its operations and make some money from sales, which fell 26% in August since the same time last year despite significant reductions.

The company needs such money not only to buy, but also to reduce, its huge debts. New rules have been enacted A Beijing post last year that forced Chinese major manufacturers to reduce their debt is one of the main reasons they are being pressured to Evergrande last year.

“We look forward to the changes that will take place in Evergrande, as long as there are some unexpected good things for the company such as the sale of goods,” said Matthew Chow at S&P.

What loans are at stake?

At the end of June, Evergrande had loans of Rmb572bn ($ 89bn) plus bank loans and lending in bond markets within China. This was down 20% from Rmb717bn by the end of 2020, following a press to minimize to borrow. But other operations of the company mean that all of its debt is very high at Rmb1.97tn, and has risen since December.

When it landed Evergrande in August, S&P estimated that the company had met with Rmb240bn in business and payments for the next 12 months, and Rmb100bn this year. By the end of June, the developer had Rmb87bn of revenue.

Evergrande growth in Huai’an, Jiangsu province, China. Evergrande usually pays retailers, a temporary IOU type, which other companies refuse to accept © Zhao Qirui / VCG via Getty

At about $ 14bn in dollar bills, none of them are due for 2021. However, Evergrande has $ 129m in interest-paying on the business this month, and $ 850m this year, according to Fitch.

On Wednesday, REDD Intelligence, an intelligence service, said Evergrande could suspend payments for the sale of its assets. In contrast, REDD reported that Evergrande told banks it would suspend interest rates on lenders on September 21st.

Evergrande did not respond to a request for comment.

What does dishonesty mean in the bond market?

Evergrande lists the world’s largest companies among retailers, including Allianz, Ashmore and BlackRock. Failure can have serious consequences in global markets, which many women already expect Chinese government support in times of trouble.

Evergrande is trying to solve its problems by selling goods. But Iris Chen, a researcher at the Japanese bank that sends money to Nomura, said at the end of August that such a thing could “harm” those who live in the maritime bank because “the money could be used to pay for offshore bodies” like building money and reliable loans.

Another optimism is strongly influenced by other developers, who also rely heavily on credit markets and are overseen by Beijing’s marketing campaign. Guangzhou’s R&F was downgraded by Moody’s on Friday for complaining that it would have a difficult time lending money to meet its long-term goals, a process called refinancing. Guangzhou R&F has incoming debts that exceed its costs, according to Moody’s, so if it doesn’t repair it, it will suffer. The group’s straps have been sold out this week.

Rental prices are rising, while China’s higher yields are rising about 13 percent at the end of last month, compared to less than 10% in June, according to the Ice Data Services index.

Researchers in Citi last week said August sales were 19% a year for the 31 companies listed in the financial sector. The bank added: “Anxiety and murder from Evergrande have led to difficulties in repaying loans abroad (due to demand) and at sea (because of its cost).”

What does it mean inside China?

Although the central government would allow Evergrande to change instead of just paying for it – an idea that would be in line with the idea of ​​changing the market – the authorities could play a role in improving the workforce of the 163,000-member group. Chinese manufacturers are also heavily indebted to the country’s largest public banks.

The program of unchanged in February China’s Fortune Land Development, a company that operates in industrial parks, has set up a loan committee. A Redd report in August said the Guangdong government was collecting responses from banks regarding the Evergrande loan committee, with the group saying last week that it was talking to the government about the suspension.

After the markets, the most important crisis in Beijing could affect the entire economic sector, which has been the middle engine of the economy in China for many years – but one that has been plagued by debt debt.

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