A forecast has emerged that the net loss of Biguiyuan (碧桂園, Country Garden), a large Chinese real estate developer facing a default crisis, will reach up to 10 trillion won in the first half of this year. Amid concerns that the already difficult Chinese real estate market could freeze rapidly if Biguiyuan falls into default, the possibility of private property contribution from the family of the owner, who receives huge dividends, is being discussed.
According to Bloomberg News on the 11th, Biguiyuan Holdings announced on the Hong Kong stock exchange the previous day that it expects a net loss of 45 to 55 billion yuan (about 8.2 trillion to 10 trillion won) in the first half. This contrasts with the net profit of 1.91 billion yuan (347.9 billion won) in the first half of last year. Biguiyuan only announced that losses were expected in the first half at the end of last month.
“Due to the recent deterioration in the sales and refinancing environment, the available funds in the account book continue to decrease, which has resulted in liquidity pressure step by step,” said Biguiyuan. Previously, Biguiyuan failed to repay interest of $22.5 million (29.6 billion won) on two types of bonds with a par value of $1 billion, due on the 7th, and will fall into default if it fails to fulfill its debt obligations even within the 30-day grace period. As of the end of last year, Biguiyuan’s total debt reached 1.4 trillion yuan (255 trillion won).
Biguiyuan’s stock price has fallen by more than 40% from its peak at the end of last month, and this week alone, it has fallen by 27% from the previous day, and the Hong Kong stock market also fell by more than 5% this afternoon. According to a Bloomberg tally, the price of biguiyuan dollar-denominated bonds fell 59% in the past month alone.
Biguiyuan did not specifically mention interest payments in the disclosure, but said it would “communicate with all shareholders and consider various debt management measures for long-term development.” However, Moody’s, an international credit rating agency, downgraded Biguiyuan’s
credit rating by three steps from ‘ B1’ to ‘ Caa1’, explaining that it reflected heightened liquidity and refinancing risks, the need for a significant amount of refinancing, and restrictions on financing.
If Biguiyuan, one of the few large construction companies that has endured without default, falls into default, the Hengda Group defaults at the end of 2021, leading to a series of defaults by other real estate companies, leading to concerns over the soundness of the Chinese real estate industry. It is feared that the incident of raising a child may not happen again. In the midst of the real estate economy hardly recovering despite the lifting of ‘Zero Corona’ and the Chinese authorities’ stimulus measures, last month, concerns about the default of large developer Dalian Wanda Group came out.
According to the Zhongzhi Institute, a real estate research institute, both new and existing (used) housing prices in China’s 100 largest cities fell last month from the previous month, and in the case of new homes, sales were sluggish despite a decrease in sales. According to the National Bureau of Statistics of China, as of the end of June, the area of unsold commercial real estate (641.59 million square meters) increased by 17% compared to the same period last year, of which the area of unsold new housing increased by 18%.
Meanwhile, Bloomberg reported that investors are paying attention to whether Yang Hui-yan, co-chairman of Biguiyuan, who received a huge amount of dividends, will offer his own assets to solve the management difficulties. According to Bloomberg’s tally, Chairman Yang is expected to receive about $28 million in dividends for his holdings in Biguiyuan Service on this day, which will enable him to pay interest on the dollar bonds in question. Yang’s dividends from Biguiyuan and Biguiyuan Services have so far amounted to $5 billion, Bloomberg estimates.
Moreover, criticism is emerging that it is unusual for Chairman Yang to hand over most of his stock holdings in Biguiyuan Service last month to a foundation managed by his family. Shortly thereafter, the company also moved forward the dividend payment date. Yang’s family foundation will also receive $35 million in dividends this time.
Previously, during Hengda’s financial difficulties, Chairman Xu Jian responded by donating his own money, and Bloomberg believes that there is a possibility that Chairman Yang will also donate his own money in the near future, as there is a precedent for Chairman Xu. Yang, who was once rated as Asia’s richest woman, has seen the biggest drop in new assets in the past two years, and her net worth is only $5.5 billion, down $28.6 billion (84%메이저놀이터) from the peak in June 2021. According to the Bloomberg Billionaires Index, Chairman Xu’s fortune, which once reached the second richest person in Asia with $42 billion, has evaporated by more than 90% and shrunk to $3 billion.
The China Securities Regulatory Commission (SCRC) held an online meeting with real estate companies and financial institutions this morning to urgently check the business conditions of real estate companies. At the meeting organized by the department in charge of corporate bonds, the CSRC grasped the sales status, cash flow, and debt situation of real estate companies and discussed countermeasures. However, local media reported that state-owned companies did not attend the meeting.
An official from a real estate company in East China who attended the meeting said, “The holding of this meeting will be good news for companies,” and “everyone is gritting their teeth and waiting for a good wind to blow,” suggesting that the authorities may come up with a stimulus package for the real estate market. did.
US President Joe Biden said on the 10th (local time) that China’s growing economic problem is “a ticking time bomb.” He attended a fundraising event in Utah and diagnosed China as “in trouble” because of high unemployment and an aging population. In addition, China’s economy is struggling with local government debt and facing difficulties in the housing market, he added.