Evergrande admits 'debt crisis.'

Will China be the next big bubble?

The real estate giant admitted that it is facing liquidity problems and can not service its debt.

China's real estate giant Evergrande Group has officially admitted a "debt crisis," stressing that it cannot sell real estate and other assets fast enough to service its massive $ 300 billion debt.

Just hours after angry investors besieged its headquarters and the company denied bankruptcy, Evergrande issued a statement on the Hong Kong Stock Exchange saying: 

A significant drop in sales would continue this month, further worsening its liquidity, Cash flows.

With 200,000 employees and 3.8 million jobs dependent on its operations, Evergrande is a real estate giant. But it is also one of the most indebted companies globally, with its $ 300 billion debt evolving into a time bomb on the foundations of the Chinese economy.

The company blamed "continuing negative media reports" for weakening investor confidence, leading to a further drop in sales in September - usually a strong month for sales in China.

Evergrande also said two of its subsidiaries had failed to meet the guarantee obligations for wealth management products worth 934 million yuan ($ 145 million) issued by third parties.

The company also appointed consultants to "assess the group's capital structure, assess liquidity, and explore all possible solutions to resolve the current liquidity issue."

One of the most indebted companies

Evergrande is one of the most indebted companies globally and has seen its shares fall 75% this year.

On Monday, chaotic scenes erupted outside the company's headquarters in Shenzhen as about 100 disgruntled investors gathered to demand the repayment of loans and financial products.

More than 60 members of the security forces formed a wall in front of the main entrances of the tall skyscraper.

The company has accumulated more than $ 300 billion in debt as it borrowed for years to finance its rapid growth and a range of real estate and other asset purchases.

It is now finding it difficult to service its debts.

 The tightening of the authorities' attitude towards the real estate market is hampering its efforts to raise liquidity, sparking concerns that it will go bankrupt.

This text ( opinion article ) is for informational purposes only and not replaces the specialized consulting services by professional experts.

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