Is it over before it started Evergrande warns of a liquidity crisis that scares investors. The stock is on the way down, but what's behind it? The situation is confusing. Yesterday made the warning about possible via Bloomberg Liquidity shortages the round. There was also speculation about an imminent restructuring of the company.
Has the company set its goals too high?
What is certain is that a lot has been done in recent months to reduce debt and improve liquidity. Investments that are not part of the core business and real estate were sold. Billions in liabilities serviced before the due date. Not completely without ulterior motives, but motivated by new legislation.
The Chinese administration is pulling rigidly Debt limits for the real estate industry, which tends to become over-indebted. From January 1, 2021, upper limits will apply that must be complied with. If a real estate developer does not meet the requirements, he is no longer creditworthy and is cut off from the capital market.
To improve its strategic positioning, Evergrande Auto launched 176.6 million new shares in mid-September. They represent 2% of the total share volume and were sold to large investors. Among them are the international cloud provider Tencent, the mobility service provider Didi and Alibaba founder Jack Ma. The discount of 20% on the prices at the time was unusually high.
The action brought $ 516 million into the coffers.
A small amount when you consider that $ 2021 billion in debt will have to be serviced in January 19. According to the current status, the repayment would take up 92% of the Group's cash reserves.
Evergrande in the crosshairs of the debt limit on the one hand and the sustained high level of investment in the auto industry on the other.
In order to solve the problem and to gain access to a wider circle of investors, the group is aiming for a listing on the Hong Kong stock exchange. The recording on Star Market the Shanghai stock exchange is said to be applied for according to Chinese media Geely Holding, owner of Volvo, took this route months ago. Inland listing allows for additional shares to be issued and makes it easier to find investors.
Campaign with forged documents?
Bloomberg reports that it has applied for a listing in Shenzhen, the second stock exchange in mainland China after Shanghai. The problem for Evergrande: The pending approval to list on a domestic exchange entitles strategic investors to exit by January 31 at the latest if the situation persists.
A realistic assessment of the situation is difficult. Evergrande fought back with a press release yesterday. Wrote of defamation and falsified documents about possible restructuring of the company that are circulating on the net. The Bloomberg announcement could be based on one of these documents.
The Evergrande Group is heavily indebted to the equivalent of almost € 105 billion. After subtracting current and short-term liquidity, € 79 billion remains in net debt. An amount that would also be relevant for Chinese standards.