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Six executives of struggling real estate giant China Evergrande have illegally sold their investments in the company in the past four months, the company admitted in a statement on Saturday.
The revelation comes as the nation’s second-largest real estate company in terms of sales is drowning in more than $ 305 billion (260 billion euros) in debt after cash from real estate pre-sales dried up.
“As of May 1, 2021, a total of 44 people, who were then senior executives… held 58 Evergrande Wealth investment products. From May 1 to September 7… 6 people redeemed 12 investment products in advance “, indicates the press release of the company. .
The company said it takes prepayment seriously. He said the funds withdrawn “must be returned within a specified time”, adding that “severe penalties will be imposed”.
Investors have demonstrated against Evergrande properties in several cities, demanding repayment of their down payments
Evergrande could fail in a few weeks
China Evergrande is on the verge of collapse after years of borrowing to finance its rapid expansion. Some commentators say its bankruptcy could be China’s ‘Lehman moment’ – a reference to US investment bank Lehman Brothers which went bankrupt during the 2008/9 financial crisis.
The Shenzhen-based real estate giant is struggling to convince its many creditors to reschedule billions of dollars in liabilities – ranging from loans, bonds, so-called fiat products to money owed to contractors and suppliers.
Interest on bonds worth $ 130 million becomes due within 10 days and will default if Evergrande does not pay within 30 days.
Reuters news agency reported on Friday that three of Evergrande’s top lenders were taking provisions for losses on certain loans or planning to give the company more time to repay. But much of the company’s debt is not held with banks.
Will Beijing intervene?
Some analysts question whether Beijing will step in to bail out Evergrande or help manage an orderly collapse.
A bankruptcy, even managed, would have repercussions on the Chinese economy given the company’s liabilities, which are equivalent to 2% of the country’s GDP.
Editor-in-chief of Chinese Communist Party-backed tabloid World time On Friday, Evergrande warned that he was not “too big to fail” and that he should not expect to be saved.
New curbs stopped real estate speculation
Evergrande was already the most indebted real estate company in the world when the Chinese government introduced strict lending restrictions in August 2020 to cool the overheated real estate market.
China Evergrande, which relies on pre-sales to consolidate revenue, was hit hard by the ensuing real estate slowdown. He was forced to sell properties at a 25% discount.
Investors have made down payments on about 1.5 million properties, Bloomberg reported, citing data from December.
Many of these buyers have expressed concern on social media about whether they will get their money back after housing projects are suspended.
With material from DPA and Reuters
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