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China Evergrande Group, a cash-strapped property developer, announced on Monday that it had been forced to destroy 39 under-construction residential projects on the resort island of Hainan, as its shares were halted from trading.
Evergrande is trying to repay moreover $300 billion in liabilities, including roughly $20 billion in offshore notes that were classified as in cross-default by rating agencies last month after missing payments.
Evergrande, formerly China’s top-selling developer, has been rushing to obtain cash by selling properties and shares to repay suppliers and creditors in the midst of an unprecedented liquidity constraint in the property sector.
The world’s most indebted developer said late Monday that on December 30, it got an order from officials in Danzhou, Hainan province, asking it to demolish 39 under-construction structures at the Ocean Flower Island project.
The cause behind the demolition order was not disclosed.
Outside of Asia’s business hours, Reuters was unable to reach the Hainan provincial authorities.
Local media had claimed that the structures, which spanned 435,000 square metres, needed to be dismantled within 10 days due to illegal construction and environmental problems.
Evergrande stated in a late Monday WeChat post that it has been working to resolve environmental concerns since 2017.
It informed the project’s homeowners that it had spent 81 billion yuan ($13 billion) in the previous six years building over 60,000 houses and that the demolition order would have no effect on the rest of the development.
Ocean Flower Island is a massive resort complex that includes amusement parks, meeting centres, and hotels.
Evergrande’s shares were banned from trading earlier on Monday pending the publication of “inside information,” according to a Hong Kong stock market filing.
The developer skipped fresh coupon payments totalling $255 million that were due last Tuesday, despite the fact that each had a 30-day grace period.
As the list of Evergrande’s unpaid creditors and suppliers grows, the company has formed a risk management committee, with several members from state-owned enterprises, and has stated that it will aggressively interact with its creditors.
Evergrande scaled back plans to refund investors in its wealth management products on Friday, stating that each investor may expect to receive 8,000 yuan ($1,257) each month as principal payment for three months, regardless of when the investment matures.
“The market is following the asset sales progress from Evergrande to repay its debt, but the process will take time,”
The demolition order in Hainan will erode the company’s remaining homebuyer confidence.”
Evergrande announced this week that building on 91.7 percent of its nationwide projects had restarted. Many projects were suspended as a result of the developer’s failure to pay suppliers and contractors.
Evergrande shares fell 89 percent last year, closing at HK$1.59 on Friday.
Its electric car subsidiary, China Evergrande New Energy Vehicle Group, recovered from early losses to increase 11% on Monday, while its property management unit, Evergrande Services, also recovered from losses to rise 1%.