Can China's Evergrande Group survive amid mounting debts, depleting resources?
China Evergrande Group's (3333.HK) restructuring plan and operations. This comes as the company's long-overdue reports for the past two years reveal significant liabilities and a decrease in cash. Adding to the unease, Evergrande's auditor commented that it could not provide an opinion on the reports due to material uncertainties surrounding the company's ability to sustain its operations as a going concern.
"The financial statements provide little evidence the group can normalise operations after a debt restructure," said Charles Macgregor, head of Asia of Lucror Analytics. Evergrande, a major player in China's property sector, faced a liquidity crisis in mid-2021, causing significant concerns. Being burdened with one of the largest debt burdens in the country, the company's financial troubles have had far-reaching effects on the real estate industry, which is a crucial component of China's economy.
As a result, numerous defaults and incomplete housing projects have emerged throughout the nation, further exacerbating the situation. In an attempt to address its financial woes and restore operations, Evergrande announced a plan for offshore debt restructuring in March. The company anticipated that this restructuring would enable a gradual resumption of its activities and the generation of much-needed cash flow.
Currently, Evergrande is actively seeking support from its creditors to successfully navigate through this process. The financial report released by Evergrande on Monday painted a grim picture, revealing a combined loss of $81 billion for the years 2021 and 2022. Moreover, the company's total liabilities reached a staggering 2.4 trillion yuan ($335 billion) in 2021, marking a 23% increase compared to the previous
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