Market report
Status: 11/18/2021 1:10 p.m.
The heavily indebted real estate company Evergrande is selling its shares in the streaming company HengTen in order to service liabilities. Analysts are sounding the alarm and warning of a default.
The Chinese real estate developer Evergrande is selling company shares to reduce its debt burden. According to documents from the Hong Kong Stock Exchange, the heavily indebted group has sold shares in the streaming company HengTen Network worth around $ 274 million. Evergrande’s shares continued to decline in response.
HengTen is considered the Netflix of China, its shares went up to 28 percent after the sale. Evergrande had already sold shares in the streaming subsidiary in the past few weeks in order to be able to service liabilities. Evergrande sold the 18 percent stake in the streaming company at a discount of 24 percent on Wednesday’s closing price. The property developer announced that 20 percent of the purchase price would be due within five working days of the date of the agreement, with the remainder due within two months.
The next deadline is the end of December
Evergrande owes $ 300 billion to banks and other creditors. In the past few weeks, the real estate developer had already allowed deadlines for the payment of bond interest to expire.
At the end of December, the next payment period expires: Then the group has to pay coupon payments in the amount of 255 million dollars. Investors and analysts fear that Evergrande will not be able to make this payment either.
S&P analysts sound the alarm
The rating agency S&P sounded the alarm after the sale of the HengTen shares, even if the liquidity situation improved in the short term: “The company is no longer able to sell real estate, which means that the main business model practically no longer exists,” wrote the analysts in a short analysis. “This makes full repayment of his debt unlikely.”
In March and April, further repayments of $ 3.5 billion would be due for the Chinese real estate giant, according to the analysts. In addition, the litmus test is imminent in spring.
Other companies falter
Analysts are increasingly concerned that if Evergrande collapses, other real estate developers in China could follow suit. In addition to Evergrande, real estate developers Fantasia and Modern Land are already struggling with payment difficulties, and the ratings of the Yango Group and the Kaisa Group have also been downgraded.