U.S. Investors Hit By Evergrande’s Potential Collapse
The potential collapse of Chinese real estate developer Evergrande Group is reverberating worldwide, with investors now nervous about major U.S. investors' exposure to real estate.
Shares in Blackstone Group, which is the world's largest landlord, dropped about 7% on Monday, though as of midday Tuesday prices recovered somewhat, up about 1.7%.
Other major real estate investors similarly dropped precipitously on Monday followed by modest rebounds the next day. The Carlyle Group shares dropped almost 8%, while Apollo Global Management and eXp World Holdings lost roughly 7%. KKR shares fell 6% on Monday.
"The danger is precisely the contagion effect, should a default occur without clear 'ring-fencing' of spillovers to other parts of the real economy or financial sector," Goldman Sachs' Hui Shan said in a research note on Monday, as reported by Yahoo Finance.
Evergrande is weighed down by about $305B in liabilities, including outstanding loans and payments owed to suppliers and vendors, and the company now is at high risk of default.
Chinese government regulations make it all but impossible for Evergrande to raise more liquidity without selling assets, but the company has found that difficult to do as well, with potential buyers apparently waiting for the company's distress to worsen.
Other investors have more direct exposure to the wobbly Evergrande. Funds managed by BlackRock and HSBC loaded up on Evergrande bonds just months ago. BlackRock has a total Evergrande exposure of $400M, according to data compiled by Bloomberg, the Financial Times reports.
Evergrande dollar-denominated bonds are now trading at below 30 cents on the dollar, down from close to face value as recently as May.