The clock is ticking for the world’s most indebted developer, whose liquidity woes sparked a broader debt crisis in China’s property market that has engulfed more home builders and posed growing challenges for the government.
China Evergrande Group, once the country’s largest real estate company, had earlier said that it was on track to deliver a preliminary restructuring plan by the end of July. That leaves mere days for the builder with about $300 billion of liabilities, just as a shake-up stirs fresh uncertainties.
The group said on Friday that chief executive Xia Haijun was forced to resign amid a company probe into how 13.4bn yuan ($2bn) of deposits were used as security for third parties to obtain bank loans, which some borrowers then failed to pay back. Chief financial officer Pan Darong was also made to step down.
Siu Shawn, an Evergrande executive director, is taking over the company as chief executive. Mr Siu said that the company has reached “basic consensus” on debt-restructuring principles with multiple major global creditors, according to a Friday report by 21st Century Business Herald.
The company rocked markets late last year when it defaulted on dollar-bond payments after liquidity scares that began in 2020. Contagion from that shock has dragged Chinese offshore junk (non-investment grade) notes, most of which come from property companies, deeper into distress.
Meanwhile, Evergrande’s creditors have been left with little indication of how much they may recover, in what would be one of the nation’s largest-ever debt restructurings.
As important as any clarity on that would be, though, there is much more at stake. Money managers and policymakers are bound to see the Evergrande restructuring as an important precedent for dealing with ever-expanding defaults and restructurings in China’s real estate market, which accounts for about a quarter of the world’s second-biggest economy.
Evergrande’s restructuring proposal may shed light on the government’s treatment of offshore bondholders, said Jean-Louis Nakamura, chief investment officer for the Asia Pacific region at Lombard Odier. He said the level of authorities’ intervention, such as in the management of the group, “will also be informative about how policymakers consider handling the property crisis going forward”.
Critical elements to watch out for would be the company’s asset disposal plans as well as terms on potential haircuts or maturity extensions, Mr Nakamura said.
As risks build, the government has been ramping up support for the sector, only months away from a once-in-five-years Communist Party meeting where President Xi Jinping is expected to seek a third term.
Financial information provider REDD reported that China’s State Council has approved a plan to set up a fund to support developers, boosting the sector’s stocks and bonds on Monday.
“Evergrande’s change of chief executive and chief financial officer may not affect its announcement of a preliminary debt plan by the end of this month,” according to a report by Bloomberg analysts including Daniel Fan.
Among potential motivating factors for meeting its previous timeline is that Evergrande has an electric vehicle unit that began taking pre-orders earlier this month for an electric sports utility vehicle. The group would want to avoid any takeover of that unit as well as potentially being sued by creditors, they wrote.
What began as a downturn in China’s housing market sparked by a government crackdown on developers’ excessive borrowing and real estate speculation in 2020, has snowballed in recent weeks into unprecedented loan boycotts from angry homebuyers and suppliers.
Evergrande residential buildings under construction in Guangzhou, China. AFP
Liquidity crunches have prompted developers to stall many projects across the country and leave fees unpaid. In one example of how this is all cascading, a group of small businesses and suppliers that said they would stop paying their own debts, blamed Evergrande for leaving them out of pocket.
As angst in China’s real estate and credit markets spreads, Evergrande’s next steps will be scrutinised all the more. The builder urged patience and asked investors not to take aggressive action during a call in March. But unresolved issues have only grown since.
Adding to challenges posed by unfinished housing projects and delayed financial results, the company also recently suffered its first rejection from local creditors to extend a bond payment, a development that may result in a landmark onshore default.
Evergrande did not offer comment on this.
The property company’s debt plan will inevitably be seen as a potential road map for other developers. Most of the real estate firms that have defaulted on dollar bonds amid the government’s campaign to tame runaway debt loads have yet to present restructuring plans, with many opting instead to delay maturities.
Another focus is how authorities will balance any state intervention with long-standing efforts to wean the nation’s credit markets from assumptions that borrowers would be bailed out.
The extent of any government involvement is an open question after Evergrande established a seven-member risk management committee last year. This included senior managers from state-owned bad debt manager China Cinda Asset Management and state-owned enterprises in its home province of Guangdong.
At the same time, senior Chinese regulators have repeatedly said in public that debt risks at Evergrande and other distressed property companies should be dealt with in a “market-oriented way".
Badr Organisation: Seen as the most militarily capable faction in the Hashd. Iraqi Shiite exiles opposed to Saddam Hussein set up the group in Tehran in the early 1980s as the Badr Corps under the supervision of the Iran Revolutionary Guards Corps (IRGC). The militia exalts Iran’s Supreme Leader Ali Khamenei but intermittently cooperated with the US military.
Saraya Al Salam (Peace Brigade): Comprised of former members of the officially defunct Mahdi Army, a militia that was commanded by Iraqi cleric Moqtada Al Sadr and fought US and Iraqi government and other forces between 2004 and 2008. As part of a political overhaul aimed as casting Mr Al Sadr as a more nationalist and less sectarian figure, the cleric formed Saraya Al Salam in 2014. The group’s relations with Iran has been volatile.
Kataeb Hezbollah: The group, which is fighting on behalf of the Bashar Al Assad government in Syria, traces its origins to attacks on US forces in Iraq in 2004 and adopts a tough stance against Washington, calling the United States “the enemy of humanity”.
Asaeb Ahl Al Haq: An offshoot of the Mahdi Army active in Syria. Asaeb Ahl Al Haq’s leader Qais al Khazali was a student of Mr Al Moqtada’s late father Mohammed Sadeq Al Sadr, a prominent Shiite cleric who was killed during Saddam Hussein’s rule.
Harakat Hezbollah Al Nujaba: Formed in 2013 to fight alongside Mr Al Assad’s loyalists in Syria before joining the Hashd. The group is seen as among the most ideological and sectarian-driven Hashd militias in Syria and is the major recruiter of foreign fighters to Syria.
Saraya Al Khorasani: The ICRG formed Saraya Al Khorasani in the mid-1990s and the group is seen as the most ideologically attached to Iran among Tehran’s satellites in Iraq.
(Source: The Wilson Centre, the International Centre for the Study of Radicalisation)
Ticket prices
General admission Dh295 (under-three free)
Buy a four-person Family & Friends ticket and pay for only three tickets, so the fourth family member is free
Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
If you’re driving, make sure your insurance covers Oman.
By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
The UN General Assembly President in quotes:
YEMEN: “The developments we have seen are promising. We really hope that the parties are going to respect the agreed ceasefire. I think that the sense of really having the political will to have a peace process is vital. There is a little bit of hope and the role that the UN has played is very important.”
PALESTINE: “There is no easy fix. We need to find the political will and comply with the resolutions that we have agreed upon.”
OMAN: “It is a very important country in our system. They have a very important role to play in terms of the balance and peace process of that particular part of the world, in that their position is neutral. That is why it is very important to have a dialogue with the Omani authorities.”
REFORM OF THE SECURITY COUNCIL: “This is complicated and it requires time. It is dependent on the effort that members want to put into the process. It is a process that has been going on for 25 years. That process is slow but the issue is huge. I really hope we will see some progress during my tenure.”
Pupils to learn coding and other vocational skills from Grade 6
Exams to test critical thinking and application of knowledge
A new National Assessment Centre, PARAKH (Performance, Assessment, Review and Analysis for Holistic Development) will form the standard for schools
Schools to implement online system to encouraging transparency and accountability
MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich v Real Madrid When: April 25, 10.45pm kick-off (UAE) Where: Allianz Arena, Munich Live: BeIN Sports HD Second leg: May 1, Santiago Bernabeu, Madrid
UAE currency: the story behind the money in your pockets
Men: Hamad Nawad and Khalid Al Balushi (56kg), Omar Al Fadhli and Saeed Al Mazroui (62kg), Taleb Al Kirbi and Humaid Al Kaabi (69kg), Mohammed Al Qubaisi and Saud Al Hammadi (70kg), Khalfan Belhol and Mohammad Haitham Radhi (85kg), Faisal Al Ketbi and Zayed Al Kaabi (94kg)
Women: Wadima Al Yafei and Mahra Al Hanaei (49kg), Bashayer Al Matrooshi and Hessa Al Shamsi (62kg)
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Sunday, January 20
3pm: Jordan v Vietnam at Al Maktoum Stadium, Dubai
6pm: Thailand v China at Hazza bin Zayed Stadium, Al Ain
9pm: Iran v Oman at Mohamed bin Zayed Stadium, Abu Dhabi
Monday, January 21
3pm: Japan v Saudi Arabia at Sharjah Stadium
6pm: Australia v Uzbekistan at Khalifa bin Zayed Stadium, Al Ain
9pm: UAE v Kyrgyzstan at Zayed Sports City Stadium, Abu Dhabi
Tuesday, January 22
5pm: South Korea v Bahrain at Rashid Stadium, Dubai
8pm: Qatar v Iraq at Al Nahyan Stadium, Abu Dhabi
