China Evergrande Shares Plummet to 11-Year Low on Default Risks

HONG KONG—Shares of Evergrande on Monday plunged as much as 19 percent to their lowest in over 11 years, extending losses as investors take a dim view of its business prospects with a fast-approaching deadline for payment obligations this week.

By noon, the stock had touched HK$2.06, the weakest level since May 2010.

The company’s property management unit dropped over 12 percent, while its electrics car unit declined 8 percent. Movie streaming company Hengten Net, majority-owned by Evergrande, plummeted 14 percent.

Evergrande has been scrambling to raise funds to pay its many lenders, suppliers, and investors, with regulators warning that its $305 billion of liabilities could spark broader risks to the country’s financial system if not stabilized.

The developer said on Sunday it has begun repaying investors in its wealth management products with real estate.

Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers are largely of the view that a direct bailout from the government is unlikely.

Evergrande is due to pay $83.5 million interest on Sept. 23 for its March 2022 bond. It has another $47.5 million interest payment due on Sept. 29 for the March 2024 notes. Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

In any default scenario, Evergrande will need to restructure the bonds but analysts expect a low recovery ratio for investors. Trading of the company’s bonds underscored just how dramatically investor expectations of its prospects have deteriorated this year.

The 8.25 percent March 2022 dollar bond was traded at 29.156 on Monday afternoon, yielding over 500 percent, compared to around 13.7 percent at the beginning of year. The 9.5 percent March 2024 bond was at 26.4, yielding over 80 percent, compared to 14.6 percent at the start of 2021.

Goldman Sachs said last week that because Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, recoveries in a potential restructuring could differ between the two sets of bonds, and any potential restructuring process may be prolonged.

The company’s woes also pressured the broader property sector as well as the yuan, which fell to a three-week low of 6.4831 per dollar in offshore trade.

Shares of Sunac, China’s No. 4 property developer, dropped over 10 percent, while state-backed Greentown China shed over 9 percent.

Hong Kong’s Heng Seng Index was down over 4 percent.

By Clare Jim