Chinese real estate giant Evergrande is once again warning that it could default on its huge debts

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The confronted Chinese real estate giant has already warned in the final weeks of its cash crisis, listing $ 300 billion in total liabilities and saying it could default if it fails to raise money quickly.

If that happened, the effects would be felt in China’s banking system and in the economy at large. The group has already suspended work on some projects as it tries to save cash, an action that is about to hit the Chinese real estate sector.

Markets in the region shook on Tuesday. He Shanghai Composite (SHCOMP) closed at 1.4%, while that of Hong Kong Hang Seng Index (HSI) fell 1.2%.

Evergrande revealed on Tuesday that it had made “no material progress” in finding investors to buy part of its stakes in its electric vehicle and real estate services businesses.

“If the group is unable to meet its collateral obligation or repay any debt when it is paid or agreed with the relevant creditors on the extension of these debts or alternative agreements, it may lead to a cross-default,” he said.

The company also announced in a stock exchange presentation in Hong Kong that it had hired financial advisors to “assess the group’s liquidity and explore all feasible solutions” as quickly as possible. But the company warned that nothing was guaranteed.
The disclosure came hours after Evergrande, one of China’s largest real estate developers, tried to reassure the public about his business. In a statement Monday night, the Shenzhen-based conglomerate directed “recent comments” on the Internet, saying rumors of bankruptcies “are completely false.”

“The company has encountered unprecedented difficulties at present, but is determined to … do its utmost to restore operations as usual and protect the legitimate rights and interests of customers,” it said in a statement on Monday.

But on Tuesday, Evergrande acknowledged his difficulty in finding buyers of his assets and said “it is not known if the group will be able to consummate that sale.”

Shares of Evergrande fell nearly 12% on Tuesday to Hong Kong $ 2.97 ($ 0.38), its lowest level since December 2014. The shares have dropped 80% in value this year.

There is another big risk in China
The company also revealed on Tuesday that the proposed sale of its Hong Kong office building, a massive property in a major Hong Kong island business district, “had not been completed on schedule.”
Evergrande agreed to buy the tower for 12.5 billion Hong Kong dollars (about 1.6 billion dollars) in 2015, according to a stock exchange document submitted by its former owner.

Evergrande’s problems were highlighted this week when a protest took place at the Shenzhen headquarters.

On Sunday, hundreds of investors showed up at Evergrande’s offices to request a meeting with a company executive, according to Chinese media outlet Caixin. Reuters reported similar scenes on Monday, with about 100 protesters on stage.
On Monday, people gathered to demand the repayment of loans and financial products at Evergrande's headquarters in Shenzhen.

Evergrande did not immediately respond to a request for further comment.

Analysts have suggested that the Chinese government should intervene to limit the consequences if Evergrande fails. There is still no indication that this will happen.

“The collapse of Evergrande would be the biggest test the Chinese financial system has faced in years,” Mark Williams, Asia’s chief economist at Capital Economics, wrote in a note last week. He predicted that the country’s central bank “would intervene with the support of liquidity” if fears of a major default were intensified.

Hong Kong-based financial restructuring specialist Houlihan Lokey and Admiralty Harbor Capital are now advisers to the firm.

– Julia Horowitz contributed to this report.

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