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Threatened with bankruptcy, Evergrande will repay a small part of its debt


The Chinese real estate giant announced on Wednesday the payment of interest on a small part of its debt, but without being able to reassure

Threatened with bankruptcy, the Chinese real estate giant Evergrande announced on Wednesday the payment of interest on a small part of its debt, but without reassuring the financial markets which are still waiting to know if Beijing will come to the aid of the private group.

The fear of seeing a repeat in China, the world's second-largest economy, a Lehman Brothers-style scenario, whose bankruptcy precipitated the 2008 crisis in the United States and around the world, has plunged the financial centers in recent days.

Read alsoEvergrande, the Chinese real estate giant that threatens the global economy

All eyes are on the Chinese government, which has not specified whether it intends to intervene in favor of the conglomerate, crushed by some 260 billion euros in debt.

While the default threatens, the giant promoter announced this Wednesday morning to have reached an agreement with bondholders on a small part of its debt.

In a press release sent to the Shenzhen Stock Exchange (southern China), the group said that one of its subsidiaries, Hengda Real Estate, had negotiated an interest repayment plan on a bond maturing in 2025.

According to the Bloomberg financial agency, Evergrande would repay 232 million yuan (30.5 million euros) of debt due Thursday on this 5.8% bond limited to the domestic bond market.

1.4 million unfinished dwellings

The holders "who bought and hold these bonds" before the date of Wednesday "are entitled to the payment of interest", specifies the press release.

But the real estate giant, headquartered in Shenzhen, is far from off the hook given the total amount of its debt.

Other loans mature Thursday on the international bond market and the group has not specified how it intends to settle them.

The announcement of the partial repayment "will help and we can hope that it will reduce the volatility and the fall of the markets a little," said Gary Dugan, of the investment consultancy firm Global CIO Office in Singapore.

"But for confidence to return for good, the market would need to see the prospects for restructuring at Evergrande," he told Bloomberg.

However, the communist regime did not specify whether it intended to help bail out the private group, of which 1.4 million homes would remain unfinished, to the chagrin of so many cheated owners.

Last week, dozens of them protested outside the group's headquarters as well as elsewhere in the country.

Creditors, employees and suppliers are also demanding to be paid by Evergrande, which increased investments until Beijing tightened borrowing rules last year.

The chairman of the group told his staff that Evergrande "will soon emerge from its darkest days," state media reported on Tuesday.

Market uncertainties

Billionaire Xu Jiayin, once the richest man in China, assured that construction sites would resume completely and that the group would provide "a response to buyers, investors, partners and financial institutions".

The announcement of the payment of interest was not enough to reassure the markets, the Shenzhen and Shanghai stock exchanges remaining down Wednesday morning, after four days of hiatus due to public holidays.

The Hong Kong Stock Exchange was in turn closed on Wednesday.

Tuesday, if the European places rebounded, Wall Street ended in dispersed order, the Dow Jones index dropping 0.15%, while analysts seek to project themselves beyond a possible default of payment.

"Investors are wondering if the Chinese authorities will be able to manage the consequences once the financial deadline has passed," said Michael Hewson, analyst at CMC Markets. It seems accepted, according to him, that a default of Evergrande is "a question of time" and "the real question concerns how it will be managed".

Source: leparis

All business articles on 2021-09-22

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