If that happened, the effects would be felt throughout the Chinese banking system and the economy in general. The group has already suspended work on some projects as it tries to conserve liquidity, a move that is expected to affect the Chinese real estate sector.
Evergrande said on Tuesday it had made “no significant progress” in its search for investors to buy out part of its stakes in its electric vehicle and real estate services businesses.
“If the group is not able to meet its guarantee obligation or to repay a debt when it falls due or to agree with the creditors concerned on extensions of these debts or alternative agreements, this can lead to a cross default” , did he declare.
“The company has indeed encountered unprecedented difficulties at the present time, but it is determined to (…) do everything possible to restore operations as usual and protect the rights and legitimate interests of customers”, she said in a statement Monday.
But on Tuesday, Evergrande acknowledged its difficulty in finding buyers for its assets, saying “it is not certain that the group will be able to close such a sale”.
Evergrande stock plunged nearly 12% on Tuesday at 2.97 Hong Kong dollars ($ 0.38), its lowest level since December 2014. The stock has lost 80% of its value this year.
Evergrande’s problems were highlighted this week when protests reportedly erupted at its headquarters in Shenzhen.
Evergrande did not immediately respond to a request for further comment.
Analysts have suggested that the Chinese government should step in to limit the fallout if Evergrande were to default. There is no sign of this happening yet.
“The collapse of Evergrande would be the biggest test the Chinese financial system has faced in years,” wrote Mark Williams, Capital Economics’ chief economist for Asia, in a note last week. He predicted that the country’s central bank would “step in with liquidity support” if fears of a major default escalated.
Hong Kong-based financial restructuring specialist Houlihan Lokey and Admiralty Harbor Capital are now advisers to the company.
– Julia Horowitz contributed to this report.