China Underground > China Finance > China property giant Evergrande warns it could default on debt

China property giant Evergrande warns it could default on debt

Evergrande is one of the world’s most indebted companies and has seen its shares plummet 75% this year. The company has amassed a staggering $300 billion in debt and today was besieged by about 100 angry investors.

The company’s debt crisis could ripple through China’s banking system.

China Evergrande Group has said that it can’t sell property and other assets fast enough to pay off the $300 billion in debt and that its cash flow is under “tremendous pressure”.

Just a few hours ago, enraged investors surrounded the Shenzhen headquarters of Evergrande, which has denied that it is bankrupt. The company issued a statement to the Hong Kong Stock Exchange saying that a significant drop in sales would continue this month, which would likely further deteriorate its liquidity and cash flow.

Evergrande accused the media of creating a climate of uncertainty among investors leading to a worsening situation.

Evergrande also said that two of its subsidiaries failed to fulfill their guarantee obligations for 934 million yuan ($145 million) of asset management products issued by third parties. This could “lead to a cross-default”.

The group’s shares fell nearly 12 percent in Hong Kong on Tuesday afternoon. The statement also said it had failed to find a buyer in the distressed sale of its electric vehicle and real estate services subsidiaries, pushing shares in those businesses down 22% and 8%, respectively.

The company’s crisis was caused by years of borrowing from the company to finance rapid growth in combination with Beijing’s crackdown on the industry.

Evergrande is one of the world’s most indebted companies and has seen its shares plummet 75% this year, prompting fears among analysts of “a contagion risk” spreading through China’s overheated real estate sector and even its banking system.

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