Beijing, Sep 14 (EFE) – Real estate giant China Evergrande Group on Tuesday warned of default risks after racking up massive $ 305 billion in debt and two subsidiaries failing to meet collateral obligations financial.
Shares of the cash-strapped real estate group plunged more than 11% on the Hong Kong Stock Exchange, a grim reminder of a similar trend last year when Evergrande lost more than 80% of its market value.
A group of investors protested at Evergrande’s headquarters in Shenzhen, in the south of the country, on Monday, calling on the company to repay loans and financial products.
The group, founded in 1996, took advantage of the wave of urban migration in China.
In 2009, the company was listed on the Hong Kong Stock Exchange and performed well over the next decade.
Its founder, Xu Jiayin, became China’s richest man with a fortune of $ 42.5 billion in 2017, according to Forbes.
The market value of Evergrande shares also peaked that year.
The Chinese real estate sector is now grappling with declining home sales and new real estate regulations.
The group would have hidden a bunch of debts contracted to extend to other sectors such as health, electric vehicles or sport.
Evergrande’s income and profits fell between January and June of this year, forcing it to put some projects on hold and some assets for sale to maintain its cash flow.
The real estate sector is one of the pillars of Chinese growth and accounts for 7.5% of the country’s GDP, according to official data.
Last week, Evergrande suffered two downgrades to its debt rating by Moody’s and Fitch.
The company said on Tuesday that the value of real estate sales in June, July and August was 153,490 million yuan ($ 23,807 million), signaling a “downward trend.”
On Monday, the company dismissed reports of potential bankruptcy as “completely false.”
He acknowledged that cash flow was under “tremendous pressure”.
Evergrande said it was in negotiations with investors over its wealth management products.
The ripple effects of a possible bankruptcy could shake the global financial market given the size of the group, which employs more than 120,000 people. EFE