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China's Evergrande Meets Crucial Debt Deadline, But Another Looming

2021-09-22T17:59:02.708Z

China's Evergrande Group will pay interest due Thursday on one of its bonds, but it keeps investors baffled by guessing about the fate of the second-largest payment due this week.



Bitcoin falls due to the Evergrande crisis in China 0:52

Hong Kong (CNN Business) -

China's Evergrande group will pay interest due Thursday on one of its bonds, but it keeps investors baffled by guessing about the fate of the second-largest payment due this week.

The troubled Chinese real estate conglomerate said in a filing with the Shenzhen Stock Exchange on Wednesday that problems related to paying a bond in domestic yuan have been "resolved through negotiations."

However, many unanswered questions remain.

Evergrande did not elaborate on the terms of the payment.

The amount of interest it owes on the bond is about 232 million yuan (US $ 36 million), according to Refinitiv data.

Interest of $ 83.5 million on a dollar-denominated bond also matures Thursday, although the company has not said anything publicly about what will happen with that payment.

  • What is Evergrande ?: 5 things you should know about the problems of the Chinese conglomerate that is on the edge of the abyss

Evergrande is under $ 300 billion in debt, which is held by Chinese financial institutions, retail investors, home buyers and their suppliers in the construction, materials and design industries.

Foreign investors also keep part of their debt.

In recent weeks, the company twice warned investors that it could default if it can't raise money quickly.

It is unclear whether the company will actually default or whether Beijing will step in and organize some other kind of restructuring.

But the failure of the company would likely create aftershocks that could affect the financial market and the Chinese economy in general.

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Earlier this week, global markets were hit by fears over Evergrande as stocks in Hong Kong, New York and other major markets fell.

Hong Kong markets, where Evergrande shares and some of its bonds are traded, closed for a holiday on Wednesday.

Trade was muted in mainland China, which reopened after a two-day holiday.

The benchmark Shanghai Composite index rose 0.4%, reversing previous losses.

Investors could have been mollified by Evergrande's listing, even though it contained few details.

"There seems to be an acceptance that an Evergrande failure is more a question of when rather than if, and the real question is how the consequences are handled," wrote Michael Hewson, CMC Markets Chief Markets Analyst, in a report on the Wednesday noting that the company had already defaulted on loans earlier this week.

He added that "the outlook on this remains uncertain after a vague statement this morning" about domestic bond coupons, noting that Evergrande did not mention anything about the US dollar interest payment due Thursday.

  • Bitcoin falls as cryptocurrencies hit by Evergrande liquidation

A big question left for Evergrande is whether the Chinese government might be willing to bail out the company.

Until now, Beijing has been silent.

Many analysts believe that the government will intervene in some way, but that a full bailout is unlikely.

"We do not expect the government to provide any direct support to Evergrande," S&P Global Ratings analysts wrote in a research note on Tuesday.

That's because a government bailout would undermine Beijing's drive to "instill greater financial discipline in the real estate sector," they wrote.

Rather than a bailout, analysts expected the government to focus on guiding Evergrande through an orderly debt restructuring or bankruptcy process, while ensuring that small investors and home buyers are protected. " as much as possible".

"Government support to prevent a default is only likely if contagion risks cause other large developers to fail," they said, adding that they believe the hit to Evergrande's financial system will remain "manageable."

Macquarie Group economists also expect the government to ensure that Evergrande's pre-sold apartments are completed and delivered to home buyers, but shareholders and lenders could "suffer a great loss."

Anneken Tappe contributed to this report.

Evergrande

Source: cnnespanol

All news articles on 2021-09-22

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