By Clare Jim
HONGKONG -Cash-strapped property developer China Evergrande Group said on Monday it had been ordered to demolish 39 under-construction residential buildings on the resort island of Hainan, as its shares were suspended from trading.
Evergrande is struggling to repay more than $300 billion in liabilities https://www.reuters.com/business/what-analysts-have-say-about-evergrande-default-risks-rise-2021-09-21, including nearly $20 billion of offshore bonds deemed in cross-default by ratings agencies last month after it missed payments.
Once China’s top-selling developer and now at the heart of an unprecedented liquidity squeeze in the property sector, Evergrande has been scrambling to raise cash by selling assets and shares to repay suppliers and creditors.
The world’s most indebted developer said late on Monday it had received an order from authorities at Danzhou city in Hainan province on Dec. 30 telling it to demolish 39 under-construction buildings at the Ocean Flower Island project.
It did not disclose the reason for the demolition order.
Reuters could not immediately reach the Hainan provincial authorities outside Asia business hours.
Local media reported earlier the buildings – stretched over 435,000 square meters – needed to be demolished within 10 days for illegal construction and environmental violations.
In a post on WeChat late on Monday, Evergrande said it had been rectifying the environmental issues since 2017.
It told the project’s homeowners that it had spent 81 billion yuan ($13 billion) in the past six years to build over 60,000 homes, and the demolition order would not affect the rest of the development.
Ocean Flower Island is a mega resort development, comprising theme parks, convention centres and hotels.
Evergrande’s shares were suspended from trading earlier on Monday pending the release of “inside information”, it said in a Hong Kong stock exchange filing without elaborating.
The developer missed new coupon payments worth $255 million due last Tuesday < VG162759965=>, though both have a 30-day grace period.
As the list of Evergrande’s unpaid creditors and suppliers continue to grow, the firm has set up a risk management committee with many members from state companies, and said it would actively engage with its creditors.
On Friday, Evergrande dialled back plans to repay investors in its wealth management products, saying each investor could expect to receive 8,000 yuan ($1,257) per month as principal payment for three months irrespective of when the investment matures.
“The market is watching the asset disposal progress from Evergrande to repay its debt, but the process will take time,” said Conita Hung, investment strategy director at Tiger Faith Asset Management.
“And the demolition order in Hainan will hurt the little homebuyer confidence (that) remained in the company.”
Evergrande said last week 91.7% of its national projects have resumed construction. Many projects were halted after the developer failed to pay suppliers and contractors.
Shares of Evergrande shed 89% last year, closing at HK$1.59 on Friday.
Its electric vehicle unit China Evergrande New Energy Vehicle Group reversed early losses to rise 11% on Monday, while property management unit Evergrande Services also turned around from the red to rise 1%.
($1 = 6.3521 Chinese yuan renminbi)