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Property developer: When one has liabilities of RM1.25 trillion. (yes, this is a lot of money)

Property developer: When one has liabilities of RM1.25 trillion.

The size of Singapore’s economy is US$324 billion (RM1.35 trillion) and Malaysia’s at US$315 billion (RM1.3 trillion). Source: worldometers.info. The market capitalisation of Tesla is over US$700 billion (RM2.9 trillion). Source: google for ‘Tesla market capitalization’ today (15th September 2021) Just need to note that Tesla’s profit numbers are smaller than most of the car manufacturers whose market capitalisation is much smaller than Tesla yeah.

Now that we some idea of how big some companies have become, let’s look at a property developer which has liabilities of RM1.25 trillion.

Article in themalaysianreserve.com China’s government is assembling a group of accounting and legal experts to examine the finances of China Evergrande Group. This is a potential precursor to a restructuring of the world’s most indebted developer. 

Guangdong officials have turned down at least one bailout request from billionaire Evergrande founder Hui Ka Yan, who owns a controlling stake.  

Evergrande said yesterday that the company hired its own advisors, Houlihan Lokey and Admiralty Harbour Capital, to “assess the group’s capital structure” and “reach an optimal solution for all stakeholders”.

Evergrande has about US$300 billion (RM1.25 trillion) of liabilities. China’s Financial Stability and Development Committee, the nation’s top financial regulator, gave its blessing to an Evergrande plan last month to renegotiate payment deadlines with banks and other creditors on a piecemeal basis. There are much more details in the article here: Article in themalaysianreserve.com

When companies go bust, it does not benefit anyone yeah

When a company has liabilities, it means many would be affected if this company shuts down forever. Everyone will not get paid. However, if the company receives sufficient lifeline, then the chances that it could repay these debts would be a possibility. This is the reason many restructuring deals do not start with closing down the company.

That’s usually the last resort and taken only after no parties could agree to any deal. When that happens, everyone loses, including the employees of the company who will have to find a new job too. With a company with super big liabilities, it will not just affect the creditors yeah. It will affect even the banking system and this is not a good news for any country.

This is perhaps why property developer Evergrande is now a big news. This is also why I hope no Malaysian developers ever grow to such a big size that it may affect the whole industry. Top 10 developers or more is perfectly fine… just not the only 1 biggest developer.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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