Friday 29 October 2021
Lending rates are becoming a problem
Evergrande just barely escapes default
The payment default hangs ominously over the highly indebted real estate group China Evergrande. For the second time, the company is only able to make last-minute interest payments on its loans. Experts do not see the danger of a chain reaction for China’s economy as averted.
The ailing Chinese real estate group Evergrande has again averted a last-minute default. Shortly before the deadline, the group paid due interest on a foreign bond, as reported by the financial news agency Bloomberg. The $ 47.5 million (40.6 million euros) therefore flowed on Thursday, the deadline expired on Friday.
The payment came after Evergrande narrowly averted a costly default last week by transferring $ 83.5 million in coupon payments to an escrow account. Further payments will be due in the coming weeks. Evergrande didn’t want to comment.
Evergrande is sitting on a mountain of debt equivalent to around $ 300 billion. In view of the size of the liabilities, the financial markets were recently worried that a collapse of the group could trigger a conflagration in the Chinese real estate sector. Failure to pay the interest could have resulted in a formal default by the company and default on other Evergrande dollar bonds.
But according to analysts, the cow is not off the ice even with the payment that has now been made. “Evergrande has done everything possible to solve its liquidity problems. But it is already difficult to raise enough capital to be able to service all debts,” said Cliff Zhao of the China Construction Bank International in Hong Kong. He expected further talks between Evergrande and the lenders.
It is still unclear whether the Chinese state would step in to avert bankruptcy. However, the Chinese central bank recently assured that Evergrande’s risks to China’s economy were “manageable”. Bloomberg recently reported that Beijing is pushing Evergrande boss Xu Jiayin to bail out the company with money from his personal wealth.