One of the largest companies in China, Evergrande is experiencing a financial crisis.
Evergrande is known to have debts of up to 300 billion US dollars, or around Rp. 4,260 trillion (exchange rate of Rp. 14,200) with a debt interest that has matured in the amount of 83.5 million US dollars. In recent years, the company founded by Chinese billionaire Xu Jiayin, who was also China's richest man, has been inflating debt to fund various corporate projects with different objectives. The debt value continued to balloon uncontrollably until in the last few weeks the company warned investors about the company's capital problems. Evergrande's party also said that the company was at risk of default because it was unable to generate income in a short time. Evergrande's warning to investors was revealed last week. , when the company provides information to the stock exchange. They admitted that it was difficult to find buyers for the company's assets that were starting to be sold. Many experts said that Evergrande's overly ambitious business was the main reason the company was in debt. Evergrande is considered to have strayed too far from their core business, namely the property and real estate business. "Evergrande Group has strayed away from their core business, which is part of the source of this chaos," said Mattie Beckink, China director of the Economic Intelligence Unit. Meanwhile, Goldman Sachs analysts said the company's structure was another cause of Evergrande's financial crisis. The company also found it difficult to formulate a recovery process. "Evegrande Group's complexities and lack of adequate information about the company's assets and liabilities (are another cause of the company's problems)," Goldman Sachs analysts wrote in their note. local estate. The new rules allow Evergrande to sell their properties at a low price to ensure the funds flow quickly and the business can run. However, the company is struggling to pay the interest on their debt. This also made Evergrande's share price plunged about 85 percent during the year. The corporate bond rating has also been lowered by a global credit rating agency. As reported from Bloomberg, Evergrande has started paying their debts to investors who have the company's wealth management products. Instead of paying with cash, Evergrande pays off maturing debt with discounted-priced properties. Investors who choose the property payment option can contact the company's wealth management division. Bloomberg reported, as many as 70,000 people have purchased Evergrande wealth management products. The Caixin news agency reported that the total outstanding of wealth management products that Evergrande had to pay was US$6 billion. This wealth management product is usually held by retail investors. In order to avoid paying investors in cash, companies also heavily discount their property assets. Investors can transfer their investment that has matured to residential housing units with a discount of 28 percent, offices with a 46 percent discount, and shops and parking units with a 52 percent discount. Meanwhile, for the cash payment option, investors can choose to be repaid at 10 percent of principal and interest every quarter, with repayments made within 2.5 years. Meanwhile, Chinese property giant Evergrande Group shares slumped sharply on Monday (20/20). /9/2021). This is their lowest position in 11 years. The decline in share value was due to negative sentiment due to the company's repeated losses and the deadline for paying bonds, Reuters reported, the company was trying to raise funds to pay debts to lenders, suppliers and investors. Local authorities even warned that delays in paying bonds amounting to US$ 305 billion (Rp 4,346 trillion) could trigger instability in the country's financial system. At the close of the market, Evergrade shares were down 10.2 percent at 2.28 Hong Kong Dollars (Rp 4,171.2). This comes after the share price plunged 19 percent to its weakest level since May 2010. The company's property management unit fell 11.3 percent. Meanwhile, electric car units fell 2.7 percent. Meanwhile, film streaming company Hengten Net, which is majority-owned by Evergrande, fell 9.5 percent. said the managing director of the Asset Management Department at Canfield Securities Limited, Kington Lin. Kington said Evergrande's share price could fall below Hong Kong dollar or equivalent to Rp 1,829 if the company is forced to sell most of its assets under restructuring. One of Evergrande's main lenders has collected their debt. While some lending banks plan to give these companies more time to pay.