Have you ever heard of a 100-billion-dollar real estate company that defaulted because it was unable to repay its overseas debts?You may think that this is a fantasy story, but in fact, this is the real situation that happened to Baolong Real Estate recently.
Powerlong Real Estate is a real estate company with operations in Chinese mainland, Hong Kong and Singapore, with total assets of more than 100 billion yuan, but it is facing a debt crisis due to the broken capital chain. What is the impact of Baolong Real Estate's default on the entire real estate industry?Can the financial pressure on real estate companies really be alleviated next year?
The debt problem of Baolong Real Estate was actually exposed as early as the beginning of this year. According to Baolong Real Estate's financial report, as of June 30, 2023, its total debt was:279.800 million RMB, among othersThe proportion of foreign debt is as high as 635%, and its cash and bank deposits only14.200 million RMB, which is far from enough to pay the debts due. Baolong Real Estate's debt crisis is mainly due to its over-reliance on overseas financing, which has been affected by factors such as exchange rate fluctuations, capital controls and declining market confidence, resulting in a tight capital chain and difficulty in rolling debts.
Powerlong's debt crisis peaked on November 29. The company issued an announcement announcing that it expires at 1,591 in April 2025Interest on the $6.25 million bond matures on Oct. 30 with a 30-day grace period, however, as of Nov. 29, the company has not been able to complete the payment. In view of the current pressures facing the Group, the Company believes that there is a need for an immediate and comprehensive solution to the current overall debt problem.
The company has made its best efforts, but it is expected that current and future debt needs will still not be able to meet liquidity and bank deposits. Baolong Real Estate stated in the announcement. This means that Baolong Real Estate has officially declared default, becoming the eighth real estate company to fall into default so far this year.
The default of Baolong Real Estate is not an isolated case, but reflects the deep adjustment of the entire real estate industry. Since the beginning of this year, due to the introduction of a series of real estate regulation and control policies by the state, including the "three red lines" and "three synchronizations", as well as the impact of factors such as the epidemic and the economic downturn, the demand and supply of the real estate market have declined significantly, and housing prices have also appeared to varying degrees. This is undoubtedly a huge challenge for high-leverage, high-cost, and high-inventory real estate companies, resulting in the rupture of the capital chain of some real estate companies, the inability to repay debts, and even the risk of bankruptcy and liquidation.
According to statistics, as of November 30, there have been since the beginning of this year8The real estate company declared default, and the amount of debt involved reachedNearly 30 billion yuan, an all-time high. Some of these defaulting real estate companies are small and medium-sized real estate companies, such asZhongliang Holdingsin real estateZhongnan Constructionetc., some are large-scale real estate companies, such asEvergrande GroupGreentown ChinaPowerlong Real EstateWait. The default of these real estate companies not only has a serious impact on their own operation and development, but also has a huge negative impact on their creditors, partners, employees, home buyers and other relevant parties, and even caused some social problems, such as rights protection in the Evergrande incident.
Although the situation in the real estate industry remains grim, there are some positive signs that the financial pressure on real estate companies is expected to ease next year. On the one hand, with the optimization of the policy environment, the bond financing of real estate enterprises has gradually stabilized recently, and the financing cost of real estate enterprises has also decreased. According to the data, in November, the total amount of bonds issued by real estate companies was167.400 million RMB, a month-on-month increase, a year-on-year increase, the highest level this year. The average interest rate on the issuance of real estate enterprise bonds is, up from 6 in October8% is down. This shows that the market's confidence in real estate companies has recovered, and the financing channels of real estate companies have been broadened.
On the other hand, with the gradual recovery of the real estate market, the sales revenue of real estate companies has also increased, and the cash flow of real estate companies has also improved. According to the data, in November, the sales area of commercial housing of real estate development enterprises in the country was1.5.4 billion square meters, a month-on-month increase, a year-on-year increase, the highest level this year. The sales volume of commercial housing of real estate development enterprises is1.64 trillion yuan, a month-on-month increase, a year-on-year increase, also hit the highest level this year. This indicates that the demand in the real estate market has rebounded, and the sales performance of real estate companies has improved.
The default of Baolong Real Estate is a microcosm of the deep adjustment of the real estate industry and a manifestation of the financial pressure of real estate enterprises. However, with the optimization of the policy environment and the improvement of market conditions, the financial pressure of real estate companies is expected to ease next year, and the real estate industry is also expected to come out of the trough and usher in new development opportunities.
Of course, this also requires the efforts of real estate companies to respond to market changes and enhance their competitiveness and anti-risk ability by optimizing debt structure, reducing leverage, controlling costs, improving efficiency, and innovating business models. Powerlong Real Estate has a negative interest of more than $15 million