Evergrande launches repayment plan by offering properties to investors
The China Evergrande group’s repayment plan for its property-based wealth management products has begun, but the prospects for the debt-ridden real estate giant of weathering the current liquidity crunch remain grim, industry watchers say.
If investors request redemption of their investments through real estate assets, they can contact their investment advisers or go to local home sites with their ID cards and investment contracts for consultation and transaction, it said. Saturday evening the Evergrande asset management unit.
This is one of three options Evergrande offers for late payment for its wealth management products after hundreds of investors from across China drove to the company’s headquarters in Shenzhen to demand the repayment of their investments which could amount to more than 40 billion yuan (6.19 billion dollars).
As part of a plan offered by Evergrande for its wealth management products, repayment could be made by cash installments, of the properties or debts of investors on homes they have already purchased, according to the announced plan. by Du Liang, head of Evergrande’s wealth management unit. In particular, investors could benefit from a 28 to 52% discount on current prices if they choose Evergrande properties like apartments, shops and parking lots.
“For investors, apartments are not as liquid as cash, but still have sufficient value, so the option may not be the best outcome, but not the worst either,” Shen Meng, director of Beijing-based investment bank Chanson & Co. , the Global Times said on Sunday.
Evergrande’s liquidity problem is believed to be due to the previous credit bubble, which led to the developer’s aggressive expansion into several sectors. Yet after regulators tightened the rules and oversight of funding channels to limit irregularities, its capital chain became strained with liquidity.
The company has been mired in a liquidity crunch in recent weeks, with a reported estimate of more than $ 300 billion in liabilities and defaults on several debts.
Bloomberg reported on Friday that Chinese regulators have asked several banks that Evergrande will not be able to make interest payments on loans due this week, and that the developer is still trying to negotiate extension issues with the banks.
Despite market speculation about government intervention to save Evergrande, the possibility is increasingly slim.
“Evergrande still has enough assets to cover its debts, so other than helping financial institutions roll over some loans, there is no need for government intervention at this stage,” Shen noted.
âEvergrande needs to solve its debt problem on its own, even though it may suffer losses by selling some assets. It needs to reduce its leverage ratio urgently,â Shen said.