The state is apparently rushing to help the Evergrande crisis group

As of: 01/24/2022 3:21 p.m

According to a media report, the Chinese real estate group Evergrande, which is threatened with bankruptcy, is to be supported by the provincial government. The company’s stock rose significantly in response.

A solution to the debt problems is emerging at the struggling Evergrande group. The second largest Chinese real estate developer is to be supported and restructured by the Guangdong provincial government, according to a media report. Investors saw this as a sign that the government was trying to stabilize Evergrande. Shares on the Hong Kong stock exchange were up 14 percent by the close.

According to a report by information provider REDD, the provincial government of Guangdong, where Evergrande is headquartered, plans to present a comprehensive restructuring plan by March. According to the report, the foreign assets are to be separated from the group and sold to state-owned companies. The money is to be used to repay loans and bonds from foreign investors.

In addition, Evergrande announced that a representative of the state asset manager China Cinda Asset Management should move into the board of directors. The wealth manager is one of the four largest in China. At the same time, the head of the Evergrande subsidiary New Energy Vehicle Group, which specializes in electric cars, was appointed to the board of directors. Together with the representative of the asset manager China Cinda, he is to lead the conversion. Evergrande wants to use the electric cars to compensate for the ailing real estate business.

$300 billion in debt

Evergrande itself asked its investors for more time to restructure. A corporate restructuring and refinancing will benefit all shareholders. Investors should refrain from “radical” measures until the restructuring plan is presented. Last week, a group of foreign bond investors announced that they would legally enforce their rights against the real estate developer if necessary.

Evergrande owes more than $300 billion and has been unable to service interest on foreign bonds in recent months. The homebuilder owes around $20 billion to foreign investors. Economists and central bankers fear that defaults on bonds and loans could trigger shock waves on the global financial markets.

In addition, the entire real estate sector in China is currently in trouble; several other real estate developers are also having problems servicing loans. This is the result of new financial regulations “the three red lines” issued by the Beijing leadership several months ago. This is intended to better regulate the real estate sector in order to limit speculation in buildings.

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