Evergrande shares rise as embattled developer resumes work on stalled projects

Chinese company averted a default by paying interest on an offshore bond shortly before a Saturday deadline

The shares of embattled Chinese developer Evergrande rose on Monday after it said it had resumed work on more than 10 projects, as it sought to soothe fears about its debt struggles.

The liquidity crisis at one of the nation's biggest property developers has hammered investor sentiment, rattled China's crucial property market and fuelled talk of a spillover into the wider economy.

But the company – drowning in a sea of debt worth more than $300 billion – last week paid interest on an offshore bond shortly before a Saturday deadline, averting a default and giving it a much-needed reprieve.

Evergrande was reported to have missed several offshore bond payments and while it had a 30-day grace period on some of them, there had been a general expectation it would not be able to meet its obligations.

On Monday, investors welcomed an announcement that its Shenzhen operations had “resumed work and production for more than 10 projects in six locations".

Shares in the company rallied more than 4 per cent in early trade.

The group had 778 projects in 233 cities in China at the end of June, according to its latest interim report.

However, work at some sites had been halted in recent months, while suppliers and contractors complained the company had yet to pay them.

The developer has been plunged into crisis since Beijing began clamping down on the country's colossal property sector last year – estimates say it accounts for a quarter of the economy – in a bid to rein in excessive debt.

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Since the start of the year, strict regulation of the property market has plunged Evergrande into a crisis vortex
Evergrande statement on WeChat

But the measures to restrict borrowing cut off the ability of companies to complete projects.

Anxious homebuyers earlier said they had turned up at unfinished sites to demand information.

“Since the start of the year, strict regulation of the property market has plunged Evergrande into a crisis vortex,” the company said on its WeChat account on Sunday.

“How the company will resume work and production on hundreds of projects across the country, and deliver buildings on schedule, affects the nerves of the whole society.”

It provided progress updates on specific projects and said that “guaranteeing the delivery of buildings” was core to the company's work.

Updated: October 25th 2021, 6:04 AM
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