China Evergrande Group’s shares finally resumed trading on Monday, and many investors seized their chance to dump the stock following a 17-month suspension.
The property developer became a penny stock after its shares plunged 87% within the first few minutes of today’s trading session. The Shenzhen-based builder is facing a staggering amount of liabilities as well as mounting losses amid China’s prolonged real estate crisis.
The company, which is headed by billionaire Hui Ka Yan, says its total debt has reached 2.4 trillion yuan ($327 billion), according to its 2023 interim report that was published just one day prior to its trading resumption. Evergrande’s net loss for the six-month period stood at $5.4 billion, while revenues was $17.6 billion.
Evergrande had previously said it fulfilled the requirements to stay listed on the Hong Kong Stock Exchange, in part, by publishing three sets of financial results and enhancing internal controls. A key test now is whether the beleaguered group can secure enough support for its offshore restructuring plan first unveiled in March.
Creditors were scheduled to vote on the scheme late Monday evening Hong Kong time, but the meeting has now been postponed for almost another month to end of September, according to a stock exchange filing made on Monday. Evergrande said it had received multiple enquiries after the trading resumption, which constitutes a new factor for debt holders to consider.
And according to the company’s last update in April, creditors holding 77% of the outstanding principal of its Class A debt had already approved the plan, but support from holders of its Class C debt —which consists of private loans and certain repurchase obligations—had only reached 30%. Evergrande needs at least 75% of creditors holding each class of debt to agree before it can implement the restructuring through so-called schemes of arrangement.
The timeline for creditors to cast their votes had been repeatedly pushed back before, with the company saying this would allow them more time to consider the proposal. Debt holders have the option to convert their current holdings into new notes with maturities of up to 12 years, or a package of financial instruments linked to shares of the company itself, its EV unit China Evergrande New Energy Vehicle Group and its property management arm Evergrande Property Services Group.
Analysts have previously stated that the EV unit probably offers more value among Hui’s once sprawling business empire. Evergrande New Energy Vehicle, which is also listed in Hong Kong, announced in mid-August that it had received an investment of roughly $500 million from Dubai-based mobility technology company NWTN.
Meanwhile, the main property company recently filed for Chapter 15 bankruptcy protection in a New York court, so that its U.S.-based assets can be protected from creditors while it goes through its restructuring. Evergrande, which was officially labelled a defaulter in December 2021, has said in stock exchange filings that it is also negotiating with lenders in onshore markets to extend debt payments, as well as seek new borrowings to ensure delivery of pre-sold apartment complexes. The company estimated in March that it would need an additional $34 to $44 billion in financing to complete the projects.