Evergrande Auto (HK 0708) and Evergrande Group (HK 3333) share prices today only knew one color. It was red. A surefire sign that plans don't seem to be working. What happened? Evergrande wants to sell shares in the auto and service businesses. But not so many, preferably in small packages. The idea: collect a few billions, but still keep the wheel firmly in hand.
That doesn't seem to work. Evergrande stands on the wall with a mountain of debt probably worth $ 300 billion. The room for negotiation is only minimal. Especially if the desired solution does not get a political tailwind from Beijing. After today it seems certain that there will be no tailwind.
Talks ended for the time being
Evergrande Auto slipped 6,51%, the Evergrande Group with 8,21%. Yuan talks reported talks with China Vanke, the country's largest real estate developer, as broken. Also the conversations with Country Garden, a large real estate company in Guangdong Province, had come to an end without success. Both companies were in Evergrande's crosshairs as potential major investors.
The negative news had not yet been dealt with. China Property Focus announced an invitation from the provincial government of Guangdong to other companies to discuss the possibility of taking over parts of the 798 projects in 234 cities in order to bring them to a regular conclusion. The national radio announced the suspension of two projects in the city of Kunming in the south-west of the country after bills of more than US $ 32 million were overdue.
Banks create some air
There was good news after all. Multiple banks extended Loans already or soon to be due and thus temporarily gave Evergrande some breathing space.
It is possible that the measures taken are not yet sufficient to stop the crisis. Selling part of Evergrande Auto might not be enough, a complete change of ownership, or selling the majority might be the solution.
The pressure is increasing almost every day, Beijing is still demanding a quick and above all “market-driven” solution. Whatever you think of it.