China Evergrande revises payment plan for wealth management products

China Evergrande Group EGRNF -6.82%

said it has devised a new repayment plan for disgruntled individual investors who have already purchased its wealth management products, as the beleaguered real estate giant takes further steps to overcome a mountain of financial debt and payments late.

The conglomerate, which earlier this month asked for government help in dealing with its debt crisis, said on Friday that one of its units had offered to pay nearly everyone who owned its 8 wealth management products. 000 yuan, or $ 1,255, per month from December to February. The unit, known as Evergrande Wealth, said it would come up with another payment plan in March.

Evergrande, one of China’s largest developers, previously sold high-yielding investment products to its employees and others, usually buyers of its properties, as part of a strategy to support its model. highly leveraged commercial. The company has grown aggressively over the years by borrowing heavily from banks, domestic and international bond investors, suppliers and individual investors, and has used a large chunk of the money to acquire land and assets in areas well beyond residential real estate. He expected booming real estate sales to generate cash to repay debts, but ran into problems after Chinese authorities limited developers’ borrowing and Evergrande apartment sales. have plunged.

Since the summer, Evergrande has struggled to repay much of its debt after accumulating the equivalent of about $ 300 billion in liabilities as of June 30. The developer also missed several interest payments on its U.S. dollar bonds, some of which were due in December. . The world’s three largest credit assessors have lowered their ratings on Evergrande to their lowest levels, declaring it in default.

Evergrande has not disclosed the total amount it owes in wealth management products that it has issued or guaranteed. In mid-September, she said two subsidiaries had failed to meet their obligations as guarantors for the equivalent of around $ 147 million in wealth management products issued by third parties. Around this time, individual investors demonstrated outside the developer’s headquarters in Shenzhen, demanding payments. At the end of September, Evergrande said it had paid the first 10% of these products which were due in September.

As Evergrande’s debt problems have escalated in recent months, Chinese authorities have made it clear that a priority is to maintain social stability and contain the fallout from the conglomerate’s problems on the wider economy and industry. real estate.

In early December, Evergrande turned to the government of his home province of Guangdong for help. Authorities have agreed to step in and help the developer deal with its debt crisis, and financial regulators have said they will help keep the wider housing market stable. Evergrande has formed a risk management committee whose members include representatives from several public institutions.

Over the weekend, Evergrande said construction had resumed on most projects where work had previously stalled and was trying to deliver 39,000 finished apartments this month, a fraction of over one million units that it has pre-sold.

Evergrande Wealth said on Friday that an earlier plan to reimburse holders of its wealth management products had been criticized by investors as “unfair.” This plan had promised investors a combination of cash, new properties at deeply discounted prices, and reductions in the money they owe for properties they have already purchased. But he only offered to reimburse those with already mature wealth management products.

Additionally, the unit said the original plan was no longer practical because the real estate projects it funded did not generate enough cash. Evergrande Wealth “will accelerate asset sales… and all of the proceeds will be used to repay wealth management products,” he added.

The new reimbursement solution will apply to all wealth management products, whether due or in progress. The plan excludes certain leaders of Evergrande, Evergrande Wealth and their family members.

Write to Rebecca Feng at [email protected]

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