Evergrande, the world’s largest indebted property developer, has been the center of an unmatched liquidity crisis in the Chinese property sector, accounting for roughly 25% of the world’s second-largest economy. With unpaid dues causing halts to multiple construction works across the country, Evergrande’s financial crisis has been public since 2021. A timeline showing the unfolding of this crisis reflects defaults on offshore debt obligations, slowed home sales, and limited fundraising options, inciting fears about possible wider effects on China’s banks. Evergrande’s subsequent activities, actions, and authorities’ reactions further depict the company’s struggle for stability under significant debt and operation difficulties.
Evergrande’s Financial Crisis
Being the top-selling property developer in China, Evergrande’s financial crisis came to light in 2021. This revelation triggered a series of defaults on offshore debt obligations by Evergrande and its peers, amid slowed home sales and limited fundraising options. This chain of events ignited fears of wider contagion that could affect China’s banks.
The Timeline of the Crisis
Below is a timeline to better understand how Evergrande’s crisis has escalated over time:
Several Evergrande projects across China have been halted due to unpaid payments. The company received a rare warning from China’s central bank and banking watchdog to reduce its debt and maintain stability.
Missed payments totaling $131 million plagued Evergrande’s offshore bond coupons, initiating a 30-day grace period. As property sales plummet, the company employed financial advisors to help navigate through cross-default risks.
Evergrande’s Major Fall
The company’s founder, Hui Ka Yan, sold a significantly large portion of his stake in the company, reducing it from 77% to 67.9%.
Trading of Evergrande shares was put on hold due to the company’s failure to publish audited results before the set deadline, coinciding with the investigation into its property management branch’s seized deposits by banks.
Restructuring and Major Decisions
A luxury mansion belonging to Evergrande’s chairman in Hong Kong was seized by China Construction Bank.
Work resumed on numerous pre-sold and not yet delivered projects.
PricewaterhouseCoopers resigned as Evergrande’s auditor due to disagreements related to the 2021 account audit.
Evergrande announced 77% class-A and 30% class-C debt holders showed their support for the proposed restructuring plan.
Hong Kong High Court gives Evergrande a reprieve to reach an accord with creditors yet warns there is limited time before deciding on company liquidation.
Near the end of this saga, in January 2024, Evergrande was issued a liquidation order by a Hong Kong court in a January 29 hearing.
($1 = 7.8201 Hong Kong dollars)
The Evergrande debt crisis has had a considerable impact on global markets and could potentially affect forex trading and assets closely linked to the Chinese economy.