Evergrande Crisis Escalates as Protests in China Break Out

Bloomberg Quicktake: Now published this video item, entitled “Evergrande Crisis Escalates as Protests in China Break Out” – below is their description.

China Evergrande Group is facing mounting protests by homebuyers, retail investors and even its own employees, raising the stakes for authorities in Beijing as they try to prevent the property giant’s debt crisis from sparking social unrest.

Police descended on Evergrande’s Shenzhen headquarters after dozens of people gathered to demand repayments on overdue wealth management products.

Evergrande told employees at its office in Shenyang, near the border with North Korea, to work from home after staffers who bought the company’s WMPs staged a protest over the weekend, a person familiar with the matter said. In Guangzhou, angry homebuyers surrounded a local housing bureau last week to demand Evergrande restart stalled construction.

Unconfirmed videos of protests against the developer in other parts of China were being shared widely on Weibo, the country’s popular microblogging platform. There’s no indication that any of them have turned violent.

In a statement, Evergrande said rumors that it will go bankrupt are not true. While the developer is facing unprecedented difficulties, it is firmly fulfilling its responsibilities and is doing everything possible to restore normal operations and protect the legitimate rights and interests of customers, according to the statement on its website. The company didn’t comment on the protests.

The latest uproar follows Evergrande’s proposal to impose lengthy repayment delays on holders of WMPs, the lightly regulated investment vehicles that have become a key source of funding for the developer.

Small-scale protests over troubled investment products aren’t unheard of in China, but they’re rare enough to attract attention from authorities who put a premium on social stability and have little tolerance for unsanctioned gatherings.

Whether they prompt Xi Jinping’s government to change tack on Evergrande remains to be seen.

With more than $300 billion in liabilities, the developer has become one of the most systemically important companies in China. On top of its obligations to WMP investors and bondholders, it owes about $147 billion in trade and other payables to suppliers and received down payments on yet-to-be-completed properties from more than 1.5 million home buyers as of December.

The developer has said it’s exploring the sale of interests in its listed electric vehicle and property services units, as well as other assets, and seeking to bring in new investors and renew borrowings. It’s also discounting properties aggressively to boost sales, with mixed success.

Evergrande said in August it was forced to suspend work on some projects due to overdue payables. The company’s billionaire founder, Hui Ka Yan, pledged to complete projects this month, issuing what he called a “military order” to ensure property construction and delivery.

Evergrande proposed three repayment options for WMPs, according to two investors who were informed by their product managers and asked not to be identified.

The new proposal treats all investors equally, in contrast to an interim plan that prioritized smaller investors, according to sources

Apart from the cash option, the new plan allows investors to purchase Evergrande’s residential units, offices, stores and parking units at deeper discounts to offset wealth products due. If investors have bought Evergrande’s residential units by Sept. 12, they can also request to use the money they’re owed to offset payments. Details are still pending for the second and third option.

A local TV station in Anhui province reported that thousands of people in the province hold overdue Evergrande WMPs that total between 1.3 billion and 1.8 billion yuan, citing a wealth management consultant at Evergrande named Liu Yuntin. The consultant said 70% to 80% of Evergrande’s own employees in Anhui purchased such products and that’s likely to be the situation for branches nationwide.

Evergrande repeatedly told staff that it would be responsible for interest and principal and that Hui Ka Yan himself would guarantee payments, Liu said.

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