Chinese developers have billions of dollars in off-balance-sheet debt: JP Morgan

According to a recent study by investment bank JP Morgan, China’s embarrassed developer Evergrande and other real estate companies have reportedly shifted billions of dollars in debt to off-balance sheet debt. When this additional debt is counted, the leverage ratio clearly rises.

Reuters reported that these real estate developers used tactics to help comply with the new borrowing cap rules introduced by the Chinese administration last year, citing a JP Morgan survey.

Banking China and Hong Kong real estate analysts Evergrande The case seems to be the most extreme.

JPMorgan analysts added that “actual gearing could be even higher because some off-balance sheet debt data isn’t available,” adding that so-called “fake” debt accounts for 55% of Evergrande. I pointed out that I went up to. Overall debt.

The balance sheet typically provides a snapshot of the company’s finances as of the issue date, showing what the company owns and borrows.

According to analysts, Evergrande has shifted some of its interest-bearing debt to debt deducted from its balance sheet and non-debt securities such as “commercial papers, wealth management products and perpetual capital securities.”

They estimate that the company’s net gearing was at least 177% in the first half of this year, rather than 100% reported.

Net gearing refers to the ratio of a company’s debt to capital...

Evergrande reported interest-bearing debt of RMB572.0 billion ($ 88.8 billion) as of June 30 in its last financial disclosure ($ 88.8 billion).pdf), A decrease of about 145 billion yuan ($ 22.5 billion) from the end of 2020. Interest-bearing debt declined primarily due to delinquent debt to suppliers, Chinese financial institution Caixin reported on September 22.

Evergrande has a debt of 1.97 trillion yuan ($ 305.7 billion) and has struggled to prevent default when liquidating assets to deal with the cash crisis.Especially after not paying back the two needed Interest payment Worth a total of $ 131 million last month, the company will face $ 150 million offshore payment obligations next week.

In addition to Evergrande, we also have experience with other Chinese real estate developers Liquidity issues, October 6th, Local Real Estate Research Center China Real Estate Information Corp. According to the data released by.

According to the data, as of September 27, a Chinese real estate company had 39 bond defaults in 2021. There were 25 defaults in the previous year, with a cumulative total of 46.75 billion yuan ($ 7.2 billion), an increase of 159% over the previous year.

August 2020, People’s Bank of China Presentation Developer Borrowing Limits: A 70% cap on the ratio of liabilities to assets (excluding presales). 100% limit on net debt-to-capital ratio. Holding cash to cover short-term debt.

Other large Chinese developers identified by JP Morgan as having higher gearing levels than announced include R & F properties 139% vs 123%, Sunac China Holdings 138% vs 87%, and Country Garden. Includes 76% vs. 50%.

Evergrande stock trading in Hong Kong Paused Prior to the announcement of the “Large Transactions”, there have been no reports so far since October 4th.

Fran Wan