Chinese Real Estate Crisis Spreads to Sweden: Evergrande Update

(Bloomberg) -- China Evergrande Group’s financial woes have reached Sweden, with a unit of the company’s electric-vehicle arm in talks to find new backers after cutting 300 jobs.  

Stefan Tilk, the chief executive officer of National Electric Vehicle Sweden AB, told Bloomberg News that the firm had entered discussions with new potential owners. “I’m acting as if things won’t be working out with Evergrande,” he said.

The Chinese real estate firm is battling to stay afloat as it contends with more than $300 billion in liabilities. The fallout has rippled through China’s economy and global financial markets, and its Hong Kong-listed EV arm is also facing a battle for survival. 

In August NEVS, as the Swedish unit is known, gave notice to almost half its 670 workers at the former Saab factory in Trollhattan. There’s “no major activity” in the plant, Tilk said. 

“The Evergrande situation triggered the decision,” he said. “These are things I had wanted to do for some time, but now it became necessary, given that Evergrande no longer can finance us.” 

Key Developments:

• Chinese Builder R&F Surges on Co-Founders’ $1.6 Billion Rescue
• The Evergrande Fear Has Receded Too Easily: John Authers
• Evergrande’s Bank Stake Sale First Step on Solving Crisis: S&P
• China Developers’ Junk Dollar Bond Issuance at Lowest Since 2017
• Evergrande Resumes Work on About 20 Home Projects in Guangdong
• Billionaires Get Help From China’s Move to Contain Evergrande
• Evergrande Investors Say They’re Yet to Get USD Bond Coupon
• China’s Mortgage-Backed Debt Issuance Rises Amid Evergrande Saga
• Kuroda Rejects China Bubble Risk, Says It’s Not Like 1980s Japan
• China Urges Banks to Help Keep Property Market Healthy, Stable

Sales Plunge May Hasten Asset Disposals (7:15 a.m. London)

China Evergrande Group’s property sales likely plunged last month, which may force the embattled developer to accelerate assets sales to ease a cash crunch, according to Bloomberg Intelligence analyst Kristy Hung.

Contracted sales may have slumped 55% from the previous month, according to a Bloomberg calculation based on data released by Nasdaq-listed China Index Holdings. Evergrande recorded 455.7 billion yuan ($71 billion) in sales from January to September, according to a CIH chart, leaving the value for last month at 17 billion yuan. That’s down from about 38.1 billion yuan in August.

The latest figures mean that Evergrande is falling short of its full-year sales target of 750 billion yuan, Hung said in a research note Friday. Evergrande is scheduled to publish full monthly figures as early as Sunday. Chinese markets are closed until Oct. 8 for a holiday.

Nobody Wants to Short the Yuan (9:20 a.m. NY)

The highly public unraveling of Evergrande is shaking markets worldwide, but analysts are confident the nation’s own currency will be spared.

The yuan has been the subject of almost no short recommendations. Even among bearish analysts, few suggest betting against it directly amid soaring trade surpluses, negative carry for short positions and potential intervention by the People’s Bank in the case of Evergrande’s collapse.

Evergrande Returns Some Cash Under Repayment Plan (6:30 p.m. HK)

Evergrande paid the first 10% installment of wealth management products due September on Thursday, in line with a repayment plan announced earlier, according to a statement on its website. Payments have been deposited into investors’ accounts, it said. 

The cash installment plan is one of three repayment options offered by Evergrande earlier this month to assuage angry buyers of the high-yield products. The other choices are for investors to receive heavily discounted properties or offset payables remaining on residential units they have already purchased, Bloomberg reported earlier. 

Chinese Builder R&F Surges on Rescue Deal (3:50 p.m. HK)

Guangzhou R&F Properties Co. climbed the most in 12 years in Hong Kong stock trading after its co-founders agreed to increase financial support for the Chinese developer, easing investors’ liquidity concerns. 

Chairman Li Sze Lim and Chief Executive Officer Zhang Li, who hold a combined 56% stake in R&F, will set up a joint venture for project development and investments with the company, it said in an exchange filing. They will commit 10.4 billion yuan ($1.6 billion) to the joint venture under the plan. 

Evergrande’s Bank Stake Sale First Step on Solving Crisis: S&P (3:45 p.m. HK)

Evergrande’s 10 billion yuan deal to sell a 20% stake in Shengjing Bank is the first step toward solving the developer’s liquidity crisis, said S&P corporate ratings director Matthew Chow. The figure “is just a small sum” considering Evergrande’s debt load and the builder likely needs to raise some 100 billion yuan, he said.

Chinese Builder Sunac Sees Financial Worries Rise to the Surface (2:36 p.m. HK)

Sunac China Holdings Ltd. is under heightened market scrutiny amid questions over its financial health, at a time when concerns about China’s property companies are being amplified by Evergrande’s cash crunch.

Some of Sunac’s dollar bonds have posted negative returns approaching 20% in September, among the worst performers in an index of such high-yield notes in China, Bloomberg-compiled data shows. Shares this week reached their lowest level since 2017 and have lost nearly half their value this year, though they rebounded 12% Thursday.

China Developers’ Junk Dollar Bond Issuance at Lowest Since 2017 (2 p.m. HK)

Evergrande’s debt crisis is making it harder for fellow real estate firms to sell dollar notes as borrowing costs soar.

Mainland developers with junk-level or no credit ratings have sold $6.43 billion of such notes since July began, down from $8.35 billion between April and June and marking the weakest showing since late 2017, Bloomberg-compiled data shows. 

Evergrande Resumes Work on About 20 Home Projects (11:28 a.m. HK)

Evergrande’s onshore real estate unit resumed construction at about 20 real estate projects in Guangzhou, Foshan, Shantou and other cities in Guangdong province, the company said in a statement posted on its WeChat account Tuesday. 

Billionaires Get Help From China’s Move to Contain Evergrande (11:20 a.m. HK)

China’s purchase of a stake in a struggling regional bank from Evergrande aimed at preventing contagion is also benefiting Shengjing Bank Co.’s investors, including some poker pals of Evergrande founder Hui Ka Yan. 

Evergrande agreed to sell a 20% stake in the bank to the local Shenyang government for 10 billion yuan ($1.55 billion), with the bank demanding that all proceeds go to settle debts with the lender.

Evergrande Investors Say Yet to Get USD Bond Coupon (9:29 a.m. HK)

Two holders of a China Evergrande Group dollar bond with a coupon due Wednesday said they hadn’t received payment as of 8:00 a.m. in Hong Kong Thursday. 

Evergrande owes $45.2 million in interest on the note due 2024, according to data compiled by Bloomberg. There’s a 30-day grace period before any default could be declared. Bloomberg News spoke to two other investors that said they had yet to receive payment as of 9:30 p.m. Hong Kong time Wednesday. All four bondholders asked not to be identified because the matter is private.

Kuroda Rejects China Bubble Risk (7:53 a.m. HK)

Bank of Japan Governor Haruhiko Kuroda played down the risk of a crisis from the troubles in China’s real estate market that have been exposed by the downfall of developer China Evergrande Group.

“China’s real-estate problem is somewhat different from the problem we faced” in Japan in the late 1980s and early 1990s, Kuroda said in a virtual panel discussion at a forum hosted by the European Central Bank Wednesday. “Extremely speculative investment in the real estate market does not appear to be the case in the Chinese case,” he said.

China Urges Banks to Help Keep Property Market Healthy, Stable (7:45 a.m. HK)

Financial institutions should help local governments maintain a healthy and stable development of the property market, and protect the legitimate rights of home buyers, according to a statement from the People’s Bank of China about a meeting on real estate finance work on Wednesday.

Banks should stick to the principle that “housing is for living, not for speculation,” according to the statement.

Here are Evergrande dollar bond interest deadlines for this month and next:

©2021 Bloomberg L.P.

With assistance from Bloomberg