Evergrande crisis: delivery of homes continues to decline, vendors receive property in lieu of overdue payments

·3-min read

Embattled China Evergrande Group is putting on a brave face even as it teeters on the brink of collapse, saying it has been steadily delivering homes and repaying suppliers as required by the central government.

The Chinese developer, saddled with 1.97 trillion yuan (US$308.5 billion) of liabilities, said on its official WeChat account on Wednesday that it had handed over 57,462 homes since July across 184 projects, from Harbin in northern Heilongjiang province to Urumqi in the northwest autonomous region of Xinjiang.

However, the number of homes delivered each month has been declining sharply. It handed over 7,568 to buyers in October, one third the volume in July when its liquidity crisis started to escalate.

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“Assuring the delivery of homes is the number one priority of Evergrande,” the Shenzhen-based company said on its social media account. “Everyone in the company, led by chairman Hui Ka-yan, has made a pledge … that we deliver quality projects at full stretch and by any means possible.”

Evergrande’s crisis has had the market on edge for the last few months because of its massive debt. Hui, in the last interim report released in August, admitted that billions of yuan worth of repayments to its suppliers were overdue and that building work at some of its housing projects had been suspended as a result.

The lack of liquidity has meant that the company has had to repay its suppliers in kind.

On Monday, furnishings supplier D&O Home Collection said that it had received property from Evergrande to offset about 39 million yuan overdue commercial acceptance bills or IOUs from the company. Property broker WorldUnion also said that it had received flats worth 253 million yuan in lieu of payment.

After the People’s Bank of China (PBOC) and China Banking and Insurance Regulatory Commission (CBIRC) summoned Evergrande executives for a meeting in August to keep operations stable, the world’s most indebted developer has been trying to portray some semblance of stability in its operations to buy it more time to repay its creditors.

In a statement posted on its WeChat account last month, Evergrande said it had restarted work on more than 10 projects across six cities – Shenzhen, Dongguan, Jiangmen, Shanwei, Zhuhai and Zhongshan – showing photos of buildings and workers at the construction sites.

“The group will shoulder the social responsibility and ensure completion of the buildings and will make an all-out effort to comply with the government’s requirements,” it said.

The Shenzhen-based developer staved off default twice last month as it made interest payments on two bonds at the very last minute of the grace period.

It paid US$83.5 million interest on its 8.25 per cent, US$2.03 billion bond maturing in March 2022 on October 21, after it missed the payment due on September 23. Last Friday, it paid US$45.2 million of coupon due on its 9.5 per cent, US$951 million bond that matures in March 2024. It missed the payment on September 29.

However, the heavily indebted developer is barely out of the woods, as more payment deadlines loom. It has two coupons totalling US$82.5 million due on November 6 and 30-day grace periods for payments missed on October 11 and 24 expire later this month.

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