Named one of the most valuable real estate companies globally in 2018, China Evergrande Group has halted its shares in Hong Kong. Following a cash squeeze due to failure in debt payments to foreign investors, the company will make an announcement “containing inside information.” The company owes nearly $300 billion to investors while being ordered to demolish 39 buildings by a city government in the Chinese resort island of Hainan.
The China Evergrande Group was established in 1966 by Xu Jiayin, has various subsidiaries, including Evergrande New Energy Auto rose to 14% in trade on Monday. As the company did not confirm the news of Everygrande’s halted shares on the Hong Kong stock exchange, the alleged news broke out after being ordered to demolish their newly built 39 luxury apartments.
Why did China halt the shares of the Evergrande Group?
The China Evergrande Group informed the Hong Kong Stock Exchange that due to a pending “announcement containing inside information,” their shares will remain halted. While the company has not elaborated on this statement, The US Federal Reserve warned Chinese real estate about the damage to the global economy last year.
The company faces a dozen lawsuits due to owing 1.6 million apartments to home buyers. They also defaulted last month to make final debt payments to foreign investors.
The China Evergrande Group has to demolish their 160 billion yuan ($35 billion) project known as The ocean Flower Island Project. Local authorities say that the company has violated rural and urban planning laws while building the project.
What is the next step for the Evergrande Group?
The China Evergrande Group is the second-largest property developer facing tremendous financial debt. The company’s Evergrande Wealth Management proposed to pay all its investors a principal amount of US$1,250 per month until February.
The new plan limits the exposure of individuals affected by the debt crisis. The wealth management products have paused all interest payments from today.
The company is actively raising funds and will update the repayment plan by the end of March.
Evergrande Group shares suspended in China.
President Xi Jinping’s “Common Prosperity” policy suggests that the distribution of wealth should be equal throughout society. This policy led to Chinese Communist Party to limit how much money a property developer could borrow.
While the government discourages the disproportionate expansion of the real estate sector, the Evergrande goes through restructuring. The restructuring of the Evergrande Group will make sure their debt does not affect the world’s second-largest economy.
While the company has missed the grace period deadline for another batch of bonds payments on December 6th – it will suspend various former and current executives and their family members from redemptions.
While many speculate the reason behind the halted shares, The China Evergrande Group continues their damage control. Various heavily indebted real estate businesses suffer financial debts similar to the Evergrande Group.
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