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Evergrande trading suspended following heavy debt, real estate crisis

Evergrande, the Chinese property developer currently facing large amounts of debt and battles with authorities, has suspended trading on the Hong Kong Stock Exchange, according to CNN.

The company said in a filing with the HKSE that the stoppage was due to an “announcement containing inside information,” but did not elaborate or respond following the decision to halt trading.

The news follows a recent decline in Evergrande’s stock, caused by a number of debt payment deadlines passing without signs it had met its obligations. These include new coupon payments worth $255 million due last Tuesday, but the real estate developer reportedly has a 30-day grace period, according to CNBC.

Evergrande currently has roughly $300 billion in total liabilities, including about $20 billion in international market bonds, leading analysts to worry that a potential collapse of the company could result in wider crisis in China’s property market and overarching financial system. The US Federal Reserve previously warned last year that the company’s failure could damage the global economy.

Fitch Ratings declared the company had defaulted on its debt in December, with the downgrade reportedly reflecting Evergrande’s inability to pay interest on two dollar-denominated bonds.

Over the weekend local media also reported the city government of Chinese resort island Hainan had ordered Evergrande to demolish its 39 residential buildings, part of the Ocean Flower Island No. 2 complex within 10 days due to illegal construction. These buildings stretched over 435,000 square meters, according to the report.

In response to these issues, the firm has set up a risk management committee with members from state companies and says it will actively engage with credits.

The company also dialled back plans to repay investors in its wealth management products Friday, saying each investor in the product could expect to receive 8,000 yuan ($1,257) per month as principal payment irrespective of when investment matures.

“The market is watching the asset disposal progress from Evergrande to repay its debt, but the process will take time,” Tiger Faith Asset Management Investment Strategy Director Conita Hung told CNBC. “And the demolition order in Hainan will hurt the little homebuyer confidence remained in the company.”

All of these factors shed light on the looming debt maturities, falling home sales and rapidly increasing liquidity squeeze facing the company, with many of its projects being halted after developers failed to pay for suppliers and contractors.

Home sales are expected to drop between 5% and 10% this year, according to the South China Morning Post. While Evergrande is one of the most notable companies failing to repay debt and facing failed building projects, other large companies including Kaisa Group, Fantasia Holdings and Modern Land also made headlines this past week over failure to repay onshore and foreign creditors.

Although Evergrande said 91.7% of these national projects resumed construction after three months, the company’s shares have lost 89% since last year and dropped to HK$1.59 on Friday.

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