Money Matters | Evergrande finds a lifeline in back door listing, thanks to soft-touch regulators
Questions went unasked about the developer’s plan to transfer its core assets into a Shenzhen-listed company
Thanks to our unquestioning regulators, Evergrande Real Estate, which has been kicking and paddling to stay afloat in a sea of debt, is finally next to a lifeboat.
Last week, the developer said it has signed a cooperative agreement with a company listed in Shenzhen that might result in the injection of its core business into the latter in return for controlling stakes.
Though this would do little to trim Evergrande’s 450 per cent gearing - the ratio of its debt to equity capital - the A-share company would provide it with a new fund raising platform.
This would have not have been possible, had the regulators been more inquisitive about certain aspects of the corporate restructuring which paved the way for the deal.
Among them was Evergrande’s disposal of its spring water, dairy, grain and oil businesses to three unheard-of Shenzhen companies on the same day and with the same three-year instalment payment.
Why and how are they paying 2.7 billion yuan for the loss-making operations? Our regulators chose to ask no questions
The businesses have been losing billions of yuan. Should they stay, the non-real estate businesses that remain in Evergrande following the spin-off cannot possibly meet the regulator’s profit requirement.
