China Evergrande has hired financial advisers Houlihan Lokey (China) and Admiralty Harbour Capital to assess its capital structure and liquidity and “explore all feasible solutions to ease the current liquidity issue and reach an optimal solution for all stakeholders as soon as possible”, as per their exchange filing. The company warned that it expects a significant continuing decline in contract sales in September, thereby resulting in further deterioration of cash collection. As per Evergrande, September typically sees real estate companies in China record higher contract sales, but due to the negative news flow, potential customers’ confidence has dampened. Meanwhile, they also revealed that potential stake sales in subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services Group have not made material progress. It added that it is actively exploring with potential purchasers on the disposal of its Hong Kong office building, China Evergrande Centre. Evergrande confirmed that two of its subsidiaries failed to discharge their guarantee obligations as scheduled for the wealth management products (WMPs) issued by third parties to the tune of ~RMB 934mn ($145mn).
In light of its difficulties, Evergrande said, “there is no guarantee that the Group will be able to meet its financial obligations under the relevant financing documents and other contracts. If the Group is unable to meet its guarantee obligation or to repay any debt when due or agree with the relevant creditors on extensions of such debts or alternative agreements, it may lead to cross-default”.
Evergrande’s dollar bonds 9.5% 2022s were down 1.5 cents to 32 cents on the dollar and its 8.75% 2025s were down 1.3 to 29.9.