[ET Net News Agency, 15 January 2020] China Evergrande Group's (03333) extension of an
A-share listing timeline removes the imminent pressure of lumpy repayments to strategic
investors, S&P Global Ratings said today.
However, as the deadline is only extended by a year, Evergrande will still need to
resolve this along with related commitments that would become due if a listing of the
investments does not materialize before January 2021.
Evergrande faced repayment this month of RMB70 billion to first- and second-round
strategic investors in the proposed reorganization and planned listing of subsidiary
Hengda Real Estate Group Co. Ltd.
The credit rating agency thinks, while the extension is positive to Evergrande's
near-term liquidity, it also means that all three rounds of strategic investments,
totaling RMB130 billion, will now have the same deadline of 31 January 2021.
S&P considers that to be material for Evergrande, despite its large scale as one of the
largest developers in China. This is because Evergrande already has a large amount of
short-term debt (RMB376 billion as at end-June 2019), and the potential repayment of the
strategic investments would add to its short-term refinancing needs.
The key remains whether Evergrande can obtain regulatory approval for the China listing
of the Hengda assets, given property development is a sensitive industry under policy
tightening at the moment.
Without a listing, the strategic investments will not fully convert into de facto
long-term equity capital, and repayment risk would linger unless strategic investors agree
to completely waive the listing deadline. (KL)