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China Evergrande shares jump on debt reduction progress

China's troubled property developer has warned banks it will suspend interest payments on loans and payments on wealth management products. Reuters photo.

HONG KONG: China Evergrande Group said its debt-cutting measures were working and the Hong Kong bourse had approved its spinoff plan, sending the property developer’s shares up as much as 14% after a selloff last week.

Investors dumped China Evergrande’s shares and bonds on Friday after a leaked document – later dismissed by the company as a fabrication – suggested the nation’s second-biggest property developer by sales had sought government help to avert a cash crunch.

The company said total indebtedness had fallen by 53.4 billion yuan ($7.8 billion) over the six months to Sept. 24 when the document appeared online, while financing costs had dropped 2.24% and it had prepaid 43.5 billion yuan of loans due after Sept. 25.

DEBT WOES: China Evergrande shares jump on debt reduction progress

China Evergrande’s borrowings totalled 835.5 billion yuan at June-end, of which onshore trust loans and bank lending made up 41% and 29% respectively.

“In the 24 years since the establishment of the company, the company has borrowed loans across 20,523 transactions. There has never been any late payment of interest nor overdue repayment of principal,” Chairman Hui Ka Yan said in a statement.

The developer is under pressure to slash debt as China’s government tackles what it considers excessive borrowing in the real estate development sector with new debt ratio caps.

As of last close, the Hong Kong-listed stock had fallen 36.2% this year on concern over competition as the novel coronavirus keeps offices shut and buyers at home.

The company said aggregated contracted sales amounted to 504.9 billion yuan as of Sept. 24, up 11.4% from the same period a year ago, and cash on hand was 204.6 billion yuan as at June 30. 

It said it aimed to achieve 200 billion yuan contracted sales in September and October through nationwide sales promotions launched earlier in September.

China Evergrande also said the Hong Kong stock exchange had approved its plan to spin off its property management business, providing the firm a channel to raise funds. The proposed float is expected to raise about $2 billion, according to Reuters’ publication IFR. 

Further capital could come from the proposed initial public offering and listing on Shanghai’s Sci-Tech Board of its unit China Evergrande New Energy Vehicle Group.


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