The American procedure known as “Chapter 15” aims to provide mechanisms for managing insolvency cases involving more than one country. Private conglomerate Evergrande found itself struggling in 2021, with a abyssal indebtedness of more than 300 billion dollars, when the Chinese authorities tightened their control over the real estate sector.
Evergrande has quickly become the symbol of the crisis in the private real estate sector in China, which remains in great difficulty, with builders finding themselves unable to complete their projects, and facing the multiplication of legal proceedings and refusals from landlords. to repay their loan.
For several months, the group has been working on a plan to restructure its debt, and made a proposal in this direction earlier this year. The promoter has indicated that it is proposing in particular to its creditors to exchange the debt for new bonds and a stake in two subsidiaries, including its ambitious branch of electric vehicles.
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The difficulties of the former number 1 in real estate have raised fears in 2021 of its collapse and risks of contagion, making the world’s second economic power shudder. According to the latest court documents submitted, the ongoing restructuring proceedings are taking place in Hong Kong.
” Best way to restructure your debt »
Analyst Yan Yuejin, director of research at the E-house China Institute, was however reassuring in an interview, saying that Evergrande’s approach was ” equivalent to finding a better way to restructure debt “. “ In fact, Evergrande’s core business is still operational. After all, he has the heavy responsibility of making sure the deliveries of pre-sold homes are done right. “, he estimated.
In July, the Evergrande group announced a net loss of more than 113 billion dollars (100 billion euros) for the years 2021 and 2022. The other giant of the sector, Country Garden, is also in difficulty after announcing the last week being unable to repay two loan installments. The first private real estate developer in China estimated its debt at the end of 2022 at some 150 billion euros. But for the Bloomberg agency, it could reach 176 billion euros. Beijing recently unveiled measures to revive the crucial real estate sector, including putting in place credit support and cutting red tape.
The Chinese real estate sector already in crisis
The setbacks of Evergrande and Country Garden are further weakening a real estate sector already undermined by the crisis in China. Seeing giants falter fuels the mistrust of potential buyers a little more, which further aggravates the financial situation of promoters. And by extension, the sector representing between 14 and 30% of GDP, this could weigh on the financial system.
During the boom years, many promoters used trust or asset management companies. At this moment, one of them is in turn crossing a zone of turbulence. The Zhongzhi conglomerate, which manages more than 125 billion euros in assets, is unable to repay investors. According to Bloomberg, worried savers have also demanded accounts from one of its subsidiaries this week.
All this is added to a gloomy economic context. Retail sales were weaker than expected in July, industrial production slowed. In an attempt to stimulate activity, the People’s Bank of China cut one of its key interest rates. A cocktail that led the yuan to depreciate against the dollar. It fell Thursday to its lowest level since November.
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(With AFP)