Evergrande loses $2B in value as trade resumes; extends creditor voting

HONG KONG  -China Evergrande Group lost as much as $2 billion, or 80 percent of its market value, on Monday after its shares resumed trading in a crucial step for the world’s most indebted property firm as it seeks to restructure its offshore debt.

Evergrande is at the center of a crisis in China’s property sector that has seen a string of debt defaults since late 2021, and its stock has been suspended for 17 months.

The developer is in the process of getting approvals from creditors and the courts to implement the debt restructuring plan. The company said the voting record time will be extended to Sept 20, from Aug 23.

In a filing on Monday, Evergrande also said the scheme meetings with creditors will be adjourned to Sept 26 from Aug 28, as “it is crucial that all… creditors understand the process of the proposed restructuring and the terms”.

Evergrande needs approval from more than 75 percent of the holders of each debt class to approve the plan, which offers creditors with a basket of options to swap debt for new bonds and equity-linked instruments backed by its stocks and those of its Hong Kong-listed units.

Its Hong Kong listed shares plunged 79 percent to HK0.35 in the afternoon session, narrowing losses from 87 percent at the opening. Market capitalization shrank to HK$4.6 billion ($586.38 million from HK$21.8 billion ($2.78 billion) from when it last traded.

The stock has been suspended since March 21, 2022, and resumed trading after the company said it had fulfilled all conditions by the Hong Kong Stock Exchange.

Its units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, have both resumed trading in the past month after a 16 month halt.

Evergrande would have faced delisting if the suspension had reached 18 months.

“Going forward things will continue to be difficult for both its operations and share performance,” said Steven Leung, Hong Kong-based director of UOB Kay Hian.

“There’s little hope that Evergrande can rely on selling houses to repay debt because homebuyers would prefer state-owned developers, and it won’t be able to benefit from stimulus policies.”

Evergrande’s valuation hit an all-time high of close to HK$420 billion in 2017.

The trade resumption also came after the developer on Sunday reported a narrower net loss for the first half of the year due to a rise in revenue.

Its liabilities slightly dropped 2 percent to 2.39 trillion yuan ($328.14 billion) during the six months period, while total assets shrank 5.4 percent to 1.74 trillion yuan.

Evergrande posted a combined net loss of $81 billion for 2021 and 2022 in a long-overdue earnings report last month, versus an 8.1 billion yuan profit in 2020.

As with Evergrande’s previous two annual financial statements, auditor Prism Hong Kong and Shanghai has not issued a conclusion on this report, citing multiple uncertainties relating to the business as a going concern, including future cashflow.

Evergrande said its ability to continue will depend on a successful implementation of the offshore debt restructuring plan, and successful negotiations with the rest of the lenders on repayment extensions.