HONG KONG / SHANGHAI – Insolvent real estate giant China Evergrande Group said Tuesday it had hired consultants to review its financial options and warned of the risk of default if property sales plummeted, causing its stock and bond prices to plummet.
The real estate giant has struggled to raise funds it needs to pay lenders and suppliers, with regulators and financial markets concerned that any crisis could spread through the Chinese banking system and potentially spark greater social unrest.
In the latest development, Evergrande said two of its subsidiaries failed to meet warranty obligations on third-party asset management products worth 934 million yuan ($ 145 million).
This could “lead to a cross-default,” which “would have material adverse effects on the business, prospects, financial condition and results of operations of the group,” it said in a statement to the Hong Kong Stock Exchange, without giving further details Products.
The company’s shares plunged six-year lows in Hong Kong on Tuesday and the Shanghai Stock Exchange suspended trading of its listed bonds amid wild price fluctuations.
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Evergrande said it has appointed Houlihan Lokey and Admiralty Harbor Capital as joint financial advisors.
The two companies will assess the group’s capital structure, assess its liquidity, explore solutions to alleviate the current liquidity stress and find an optimal solution for everyone involved as soon as possible.
“Evergrande’s announcement marks the first step in a restructuring that typically involves either a delay in interest payment, no interest payment, or a delay with haircuts,” said James Shi, distressed debt analyst for credit analyst Reorg.
He added that liquidation would only take place if the restructuring failed.
Evergrande said late Monday that online speculation about bankruptcy and restructuring was “totally wrong”.
It did so despite growing market expectations that Evergrande may need to be restructured after China ruled in August that various lawsuits against the developer would be handled centrally in Guangzhou.
Evergrande said it is speaking to potential investors to sell some of its assets but has not made “significant progress” so far.
The company announced this month that it is in talks to sell certain assets, including stakes in Hong Kong-listed Evergrande New Energy Vehicle and Evergrande Property Services.
Pressure on Evergrande, which has $ 305 billion in debt
The company blamed “ongoing negative media coverage” for dampening investor confidence, leading to a further decline in sales in September.
The company’s shares fell over 10 percent on Tuesday morning, their lowest level since December 2014. The listed e-vehicle spin-off slumped over 23 percent and shares in the property management unit fell 8 percent.
In the debt market, Evergrande’s June 2025 dollar bonds fell nearly 6 cents to 27 cents late Tuesday morning, representing a yield of 58.45 percent, according to financial data provider Duration Finance.
Movements in the company’s highly illiquid onshore bonds have been more erratic, with one exchange-traded bond in Shanghai rising nearly 23 percent and triggering a trading freeze while another in Shenzhen plunging nearly 12 percent.
Reorg’s Shi said that a default by Evergrande could potentially result in new bond sales, but market spillover would be limited as risks have been largely priced in.
The bigger risks are likely to be social, he added.
Angry investors gathered near Evergrande headquarters in Shenzhen, southern China, on Monday to demand repayment of loans and financial products.
The developer’s efforts to sell assets quickly and avert defaults on its massive liabilities increases the risk of contagion for other private developers, fund managers and analysts say.
A statement Monday said it was facing “unprecedented difficulties” but would do whatever it takes to get back to work and protect the legitimate rights and interests of its customers.
The company’s debt has been repeatedly downgraded by rating agencies targeting the developer for its huge debt restructuring efforts.