Written by Claire C
HONG KONG (Reuters) – Shares of China Evergrande Group fell as much as 87 percent early Monday when trading resumed after a 17-month suspension, losing nearly $2.4 billion of its value, after it said it had fulfilled ” adequately” all directives issued by the company. Hong Kong Stock Exchange.
Evergrande, the world’s most indebted real estate developer, is at the center of a real estate crisis in China that has seen a series of debt defaults since late 2021. Next month, the courts will rule on Evergrande’s nearly $32 billion restructuring plan. from external assets. debt obligations.
Hong Kong-listed shares traded as low as HK$0.22 on Monday, with their market capitalization shrinking to HK$2.9 billion ($369.73 million) from HK$21.8 billion ($2.78 billion) since last trading. The valuation reached an all-time high of close to HK$420 billion in 2017.
The stock has been suspended since March 21, 2022. Its two Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, resumed trading last month after a 16-month hiatus.
The resumption of trading in the three companies is crucial for the Evergrande Group because the plan to restructure its external debt involves exchanging part of the debt for equity-linked instruments backed by it.
Evergrande could have faced delisting if the suspension had reached 18 months.
“Going forward will continue to be difficult for its operations and joint performance,” said Stephen Leung, director of Hong Kong-based UOB Kay Hian.
“There is little hope that Evergrande will be able to rely on home sales to pay off debt because home buyers prefer state-owned developers, and it will not be able to benefit from stimulus policies.”
The resumption of trade also came after the developer on Sunday reported a smaller net loss for the first half of the year due to higher revenue.
Its liabilities decreased slightly by 2 percent to 2.39 trillion yuan ($328.14 billion) during the six-month period, while total assets shrank 5.4 percent to 1.74 trillion yuan.
Evergrande reported a combined net loss of $81 billion for 2021 and 2022 in its long-awaited earnings report last month, against a profit of 8.1 billion yuan in 2020.
As with Evergrande’s previous two annual financial statements, auditor Prism Hong Kong and Shanghai did not issue a conclusion on this report, citing several uncertainties related to operating as a going concern, including future cash flow.
Evergrande said its viability will depend on the successful implementation of the external debt restructuring plan, and successful negotiations with other lenders on payment extensions.
Courts in Hong Kong and the Cayman Islands will decide in early September whether to approve an external debt restructuring plan that includes $31.7 billion worth of instruments, including bonds, guarantees and repurchase obligations.
($1 = 7.8435 Hong Kong dollars)
($1 = 7.8442 Hong Kong dollars)
($1 = 7.2834 CNY)
(Reporting by Claire Gem; Additional reporting by Donnie Kwok; Editing by Kim Coghill and Christopher Cushing)