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A $17 Billion Funding Challenge Facing China's Evergrande

A $17 Billion Funding Hole Looms for China Developer Evergrande

(Bloomberg) -- Hui Ka Yan, China’s second-richest man and chairman of one of the nation’s biggest residential developers, has a funding challenge on his hands.

China Evergrande Group has debt maturing in 12 months or less that exceeds its cash by 114 billion yuan ($17 billion), its full-year report released late Tuesday showed. The gap is partly the result of a drop in its cash buffer in the second half of 2018.

Evergrande said most of its short-term debt maturities are bank loans that can be extended, adding that it also has 180 billion yuan of credit lines that can be drawn on. In addition to that, the company expects to generate significant cash proceeds from a projected 500 billion yuan of project sales this year.

A $17 Billion Funding Challenge Facing China's Evergrande

Evergrande’s shares dropped 2.8 percent in Hong Kong as a Bloomberg Intelligence index of Chinese developers climbed. Its 2025 bonds also slipped, trading down 1.9 cents at 95.5 cents on the dollar.

Hui’s efforts to whittle down a $100 billion debt pile and put the company on a more solid financial footing have some way to go, according to Bloomberg Intelligence. Illustrating the pressure on Chinese developers to refinance, Evergrande paid yields as high as 13.75 percent on notes it sold in October -- an issue Hui personally invested $1 billion in.

Read more: Evergrande revenue falls short ahead of tougher 2019

Evergrande has around $13.3 billion of bonds falling due by the end of 2020. The company “continues to face heavy near-term maturities, with 47 percent of debt due by end-2019 and another 27 percent by end-2020,” Bloomberg Intelligence analyst Kristy Hung said.

For More From Bloomberg Intelligence...

”Evergrande will likely fail to meet its target to reduce net  
debt to equity to 100 percent by mid-2019. Its plan to invest a      
further 20 billion yuan into electric vehicles this year and  
slowing contracted sales, down 43 percent in the first two
months of 2019, will be stumbling blocks to its ambition to
deleverage.”
-- Kristy Hung, industry analyst in Hong Kong. Click here for
the full note

To contact Bloomberg News staff for this story: Emma Dong in Shanghai at edong10@bloomberg.net;Ina Zhou in Hong Kong at hzhou179@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe, Paul Panckhurst

©2019 Bloomberg L.P.

With assistance from Bloomberg