Late on August 10, Evergrande Group Ltd. (referred to as "Evergrande" hereafter) issued several reports, including the 2022 bond annual and semi-annual reports, the 2021 bond annual report, as well as their annual audit reports for 2022 and 2021, and the semi-annual financial report for 2022.
According to the financial data, Evergrande reported a net loss of RMB 527.20 billion for 2022. As of December 31, 2022, their current liabilities totaled RMB 16,787.47 billion, while the company's monetary funds (including cash, cash equivalents, and restricted funds) stood at RMB 91.73 billion.
The company's total liabilities reached RMB 18,338.19 billion, surpassing its total assets of RMB 14,685.57 billion, indicating that the company's assets no longer cover its debts.
The report reveals that by the end of 2022, Evergrande had land reserves of 170 million square meters. Evergrande stated its commitment to resuming construction and ensuring project delivery. The company aims to secure understanding and support from local governments, upstream and downstream partners, and others. It plans to accelerate asset disposals, streamline operations, optimize staffing and salary structures, and explore comprehensive debt solutions in collaboration with domestic and international creditors.
Deeper Troubles in 2021 and 2022
Evergrande indicated that in 2021, due to multiple adverse factors, including macroeconomic, industry, and financing conditions, the company found itself in a liquidity predicament resulting in debt default. This situation persisted in 2022 due to unforeseen challenges, further impacting their normal operations.
Moreover, the company faces numerous lawsuits and arbitration cases due to various reasons. These circumstances signal significant doubts regarding the company's ability to continue its operations.
Acknowledging these challenges, Evergrande's management has been proactive in suggesting debt solutions to alleviate cash flow pressures and continues to:
- Negotiate loan extensions with local lenders.
- Seek new financing or additional capital inflows through multiple channels.
- Communicate actively with creditors to address pending lawsuits.
- Focus on the completion and delivery of real estate projects to ensure stable and sustainable operations.
- As of April 3, 2023, the parent company, China Evergrande, signed a restructuring support agreement with AHG.
In 2022, Evergrande reported contracted sales amounting to RMB 281.81 billion. The company also participated in 79 urban renewal projects, 55 of which were located in the Greater Bay Area, including 34 in Shenzhen.
A noteworthy point is the issuance of an auditor's report for Evergrande that expressed no opinion. This absence of opinion is due to significant uncertainties regarding the company's ability to continue operations and challenges in obtaining adequate audit evidence.
Eye on Deliverables Amidst Struggles
Despite these challenges, Evergrande reported that it had completed the handover of 301,000 housing units in 2022. The national government has been rolling out various support and relief policies, creating favorable conditions for the industry to address its risks. Moving forward, the company emphasizes its commitment to safeguarding the long-term interests of all creditors and continuously enhancing internal risk controls and management efficiency.
Previously, on the evening of July 17th, China Evergrande had also released performance announcements for the years 2021 and 2022 and the first half of 2022, revealing a combined net loss of RMB 812 billion and total liabilities of RMB 2.4 trillion. This revelation stirred widespread discussions online, with the actions of Xu Jiayin, Chairman of the Board of Evergrande Group, under close scrutiny.
According to Financial Connect, at 5 pm on July 24th, Xu Jiayin convened a meeting focused on housing delivery, which lasted for more than half an hour. An informed source close to Evergrande mentioned that the main task of various regional companies now is to work with local teams to revitalize assets and complete housing delivery, with some projects nearing completion.
source close to Evergrande told reporters that one of the main tasks of regional companies at present is to cooperate with local specialized teams, revitalize assets, and complete the building handover work. Currently, the handover work for some projects is nearing completion.
The aforementioned insider explained that to accomplish the building handover, some regions have carried out cross-regional asset mortgaging to finance the operation.
"At present, there aren't many unfinished Evergrande residential projects. The few unfinished properties are mainly cultural and tourism projects located in places like Kunming and Guiyang. In addition, there are some unsold projects, which are essentially used as offset properties. Since they are not recognized by the government, they fall outside the scope of the building handover," said the insider.
