Evergrande, a Chinese real estate conglomerate, is under a lot of pressure.


Evergrande, a Chinese real estate conglomerate, is under a lot of pressure.

Embattled Chinese property behemoth Evergrande admitted it is under “tremendous pressure” on Tuesday, a day after maintaining it will avoid bankruptcy, which many believe will have a major impact on the world’s second largest economy.

After years of borrowing to fund fast growth, the Hong Kong-listed developer is buried by a mound of liabilities totaling more than $300 billion.

Last week, two credit rating agencies downgraded the company, and its stock fell below its 2009 IPO price as a barrage of negative stories and rumors about its impending demise spread over Chinese social media.

On Monday, worried investors demonstrated outside Evergrande’s Shenzhen headquarters, claiming that the company is facing “historic challenges” but denying rumors that it is set to collapse.

However, the business filed a new statement to the Hong Kong stock exchange on Tuesday, stating that it had recruited financial experts to look into “all conceivable measures” to alleviate its cash shortage and cautioning that it could not guarantee it would satisfy its financial obligations.

The company cited “ongoing negative media stories” for hurting sales in the crucial September period, “resulting in the Group’s cash collection continuing to deteriorate, putting great pressure on the Group’s cashflow and liquidity.”

The company’s stock dropped 9% on Tuesday, and it has lost about 80% of its value since the beginning of the year.

According to Capital Economics, Evergrande has pledged to complete 1.4 million properties, totaling roughly 1.3 trillion yuan ($200 billion) in pre-sale obligations as of the end of June.

Bloomberg News reported earlier this month that some creditors had sought prompt repayment of loans.

Its situation has sparked fears of a contagion effect across China’s debt-ridden property sector, which accounts for more than a quarter of the GDP, with negative consequences for banks and investors.

Evergrande has already sold holdings in some of its diverse businesses and given severe discounts to sell flats, but the company’s profit fell by 29% in the first half of the year.

It’s also having trouble selling its Hong Kong headquarters, even if it’s at a loss.

Xu Jiayin, who went on to become China’s richest man during the country’s property boom in the 1990s, started the firm in 1996.

He invested heavily in new city development, raising $9 billion in its Hong Kong IPO in 2009.

After a year, Xu purchased a struggling football team. Brief News from Washington Newsday.


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