We are all waiting to find out what will happen to Evergrande, the Chinese corporation that has recently gotten into a lot of trouble due to a considerable amount of debt.
The debt crisis of the property developer is a massive test for Beijing.
Some analysts out there are worried that it could be China’s Lehman Brothers’ moment, which means that it could have a severe impact on the world’s second-largest economy.
This is the real estate accounts for 30% of Chinese GDP.
Last week, investors experienced a tough week because the company met one important debt deadline, and then they failed to come to the table with another.
This means that shares increased exponentially one day and then went back down the next.
The coming days and weeks will be significant. So far, it has failed to address the two interest payments on bonds over the last week publicly.
Of course, this has left a lot of room for speculation about what will happen next, with a possible outcome being a Beijing-backed bailout, the company defaulting, or restructuring.
Everything you need to know about Evergrande statistics and facts is found below.
Key Evergrande Statistics
- Evergrande is $300 billion in debt.
- This is the largest corporate debt in the world.
- Evergrande owns more than 1300 real estat projects across China.
- More than 12 million people live in Evergrande properties.
- Evergrande manages land the size of Manhattan.
- Evergrande is inadvertently responsible for 3.8 million jobs.
- Evergrande’s debt is 2% of China’s GDP.
Evergrande Statistics: In-depth
Evergrande Owns More than 1300 Property Projects in China
A lot of these are housing complexes or apartments.
They Are Currently $300 Billion in Debt
This is more than any other company in the world. It’s also enough to cover the debts of the Philippines, Bulgaria, Iceland, and Panama combined.
- Roughly 12 million people live in Evergrande properties
These are spread out across China.
- Evergrande manages enough land to be as big as Manhattan
This is 7.3 billion square feet of land.
- Evergrande is responsible for 3.8 million jobs
This is enough to employ everyone who is living in Los Angeles.
- Evergrande’s debt is 2% of China’s GDP
This means their debt is more significant than in countries like Finland and New Zealand.
What is Evergrande?
Evergrande is one of China’s most prominent real estate developers. The company is part of the Global 500, which means that it is one of its most giant corporations by revenue.
It is based in the southern Chinese city of Shenzhen, and it is listed in Hong Kong and has more than 20,000 people employed on its books.
It inadvertently helps keep more than 3.8 million jobs afloat, according to Evergrande statistics. The group was started by Chinese billionaire Xu Jiayin, who at one point was the country’s richest person.
Evergrande made its profits from residential property and said that it has more than 1300 projects on its books that cover more than 280 cities in China.
However, it also has interests beyond real estate. The group has also invested in sports and theme parks and electric vehicles.
It also owns a food and beverage business, where it sells bottled water, dairy products, and groceries within China.
In 2010, the corporation bought a soccer team, and the team has built what is considered the world’s largest soccer school, which costs $180 million.
Evergrande continues to try and reach new records because currently, it is working on the world’s biggest soccer stadium, which is expected to be completed next year.
It is shaped like a Lotus flower, and Evergrande statistics hold expected to cost $1.7 billion. Eventually, it will be able to seat 100,000 spectators.
Evergrande has a theme park, which is called Evergrande Fairyland.
It is known for having an ocean flower island located in Hainan, a tropical province of China, which is often referred to as Chinese Hawaii.
This project includes an utterly artificial island with museums, malls, and amusement parks.
A recent annual report started taking clients on a trial basis earlier this year and is expected to completely open at the end of 2021.
Why is it in Trouble?
Evergrande has accumulated a lot of debt over the last few years, and as it continued to borrow money for its financial pursuits, its obligations continued to increase.
The group has become famous for being China’s most indebted developer and is currently more than $300 billion in debt, as Evergrande statistics show.
Over the last couple of weeks, it has communicated with investors its cash flow problems, believing that it could default if the company cannot raise the money fast.
This warning was highlighted this month when Evergrande revealed a Stock Exchange filing that it was having issues finding buyers for some of its assets.
Some believe that the company had too aggressive ambitions, which has landed it in hot water, and if it had stayed within its core business, it might have been okay.
Goldman Sachs has also observed that its structure makes it challenging to ascertain a more precise image of its recovery.
However, other factors are involved in the group’s struggles, and these can be found in China.
Experts believe that there are structural and profound challenges regarding China’s economy related to debt. The thing is, this issue isn’t new.
Last year, several Chinese state-owned companies defaulted on their loans, which started fears around China’s reliance on investment and growth with a lot of debt.
The latest news is that Evergrande has failed to pay bond repayments, and as a result, they have declared default overnight.
What’s interesting about this move is that they are not the only company to do this in the Chinese real estate sector. Kaisa, a much smaller real estate firm, has defaulted on $400 million worth of bonds.
Evergrande was given a month of grace period to make payments, but last week, a filing made to the Hong Kong Stock Exchange said that creditors had demanded their debt be paid off roughly $260 million.
Evergrande statistics showed that it missed its Monday deadline to repay bond coupons that totaled $82 million. They didn’t respond to a request for comment on these coupon payments.
As a result, their shares decreased to a new low, closing down 20% at 1.81 Hong Kong dollars.
This means that their stocks are worth as little as they were when they were first listed in Hong Kong in 2009, which means that they have lost 80% of their value since the beginning of the year.
Why Does it Matter if Evergrande Collapses?
There are several reasons why it matters if Evergrande collapses.
The first reason is that many people had bought the property from the company, even before starting to build the property.
This means they have paid deposits and potentially lost all that money if the company goes bust. Some companies do business with Evergrande.
Companies including design and construction companies and material suppliers are at risk of a significant loss, forcing them into bankruptcy.
Another problem is that if Evergrande collapses, it will have a hugely negative impact on China’s financial system.
Banks, defaults, and other lenders might be forced to lend less. This could result in what is commonly known as a credit crunch, where companies struggle to borrow money at affordable rates.
A credit crunch is going to be bad news for the world’s second-biggest economy because companies that can’t borrow find it challenging to expand, and sometimes, they are even forced to shut their doors.
This could also leave a bad taste in foreign investors’ mouths, meaning that they could see China as an unappealing place to put their money.
Is Evergrande Too Big to Go Down?
A few experts out there believe that the severe fallout of such a hugely indebted company in Beijing will step in.
Beijing is trying to rein in corporate debt right now, which means that if they bail out a company of this size, they could be setting a bad example.
How is it Trying to Move on?
Evergrande is trying to reassure investors, saying that issues around paying a domestic bond had been settled through negotiations.
The amount that they owe when it comes to the interest of the bond is $36 million, but there are still a lot of questions that remain unanswered.
They haven’t elaborated on the terms of the payment, and the interest worth $83 million was due last Thursday. This means that the deadline came and went, and there was no update from the company.
The company announced on Wednesday that it would sell part of its stake in a local bank for approximately $1.5 billion, according to Evergrande statistics, to raise some desperately needed cash.
However, instead of putting this towards their bond interest payments, they will put the money towards settling debts with lenders, like Shengjing Bank.
The company believes they would still have a 14% stake in the bank after the deal is closed.
Evergrande still has to deal with another bond interest payment of almost $50 million, but there has been no update concerning this.
Everyone announced on September 14 that they had brought in financial advisors to help deal with the situation.
These companies are tasked with considering all possible solutions as fast as possible. Still, so far, the corporation has struggled to stem the bleeding and isn’t managing to find buyers for certain aspects of the company, including its electric vehicle sector and property services.
The corporation has also been trying to sell its office tower based in Hong Kong, bought for approximately $1.6 billion in 2015.
However, it stated that they have not been able to do this within the expected time frame, and this was back in September.
How are Investors Responding?
Evergrande’s issues affected more than just those immediately related to the company this month when protests occurred surrounding its headquarters in Shenzhen.
However, investors themselves have been wary of the issue for months, as its stock has declined by almost 85% this year, according to Evergrande statistics.
What Might Happen Next?
It appears as if the Chinese government wants to step in and intervene.
Over the last few days, The People’s Bank of China has put some cash into the financial system, hoping that this will settle some people’s nerves.
On Tuesday, it added approximately $15.5 billion to keep liquidity going.
The central bank also promised to keep the real estate market developing at a healthy rate and safeguard the interests of housing consumers and fundamental rights.
On Wednesday, it met with regulators, where authorities reassured individuals that they didn’t want to use real estate as a temporary tool for economic stimulus.
Authorities encourage the financial sector to focus on stabilizing housing prices and land, recommending that companies work with local governments to maintain the healthy development of the real estate industry.
Authorities are watching closely to see what’s going to happen.
Evergrande statistics show that there is a real chance that Evergrande is going to continue to be in hot water for some time, and it’s difficult to predict how all of this is going to end.
Watch this space and, in the meantime, bring yourself up to speed on all the necessary information, statistics and facts so that you can know what’s going on when it all comes crashing down.