Friday September 24th 2021
Evergrande doesn’t pay
Staggering real estate giant China Evergrande is keeping foreign creditors waiting for an interest payment of more than $ 80 million. On the stock exchange, the shares rush into the depths. Meanwhile, local governments are preparing for a possible collapse of the group.
Concerns about the collapse of the real estate company China Evergrande are receiving new impetus. The company let a well-publicized bond interest payment deadline pass without comment. Evergrande shares plunged 11 percent after they had risen significantly on Thursday. The corporation has more than $ 300 billion in debt.
Evergrande should have paid interest due today of $ 83.5 million on what is known as an overseas bond. The default affects international investors who own these dollar-denominated foreign bonds of the group. They have a face value of around $ 2 billion. A 30-day grace period begins for Evergrande, after which the company would officially be in default.
Should the payment fail, this would create the conditions for the largest ever default of a dollar bond issued by a company in Asia. The payment deadline had moved into the focus of international investors after Evergrande’s liquidity deteriorated dramatically in the summer, which led to construction freezes on some of their unfinished housing developments and a sharp drop in sales. As recently as June, the company had emphasized that it had never missed a bond payment since it was founded in 1996.
Millions more are due
The real estate developer has financed its growth with debt in recent years and is now in arrears with banks, bondholders as well as customers and employees. Several rating agencies downgraded the credit rating, stocks and bonds went into free fall. Social problems could also arise. 200,000 people work at Evergrande, and several million workers are hired for construction projects every year. In addition, many small investors have invested money in Evergrande financial products. And numerous Chinese have bought an apartment in Evergrande projects against prepayment – they fear that it will not be completed.
Evergrande management has promised to primarily want to pay out money to small Chinese investors. Interest on a domestic bond was paid last. Another date is now moving with excitement: Next week, another $ 47.5 million in interest will be due. A payment would be an important indicator of whether the heavily indebted company can save itself.
The Chinese central bank, meanwhile, again pumped money into the banking system to calm the financial markets. The Chinese authorities are preparing for a possible collapse of Evergrande. The local governments were asked to prepare measures for this case.