Evergrande pays million interest: bankruptcy averted for the time being - but the danger has not been averted

China's crisis group Evergrande can settle a million dollar interest debt at the last minute.

But more payments are due by the end of the year.

Bankruptcy is not off the table. 

Shenzhen / Munich - The roller coaster ride of the Chinese crisis group Evergrande continues. According to a report by the Chinese stock exchange newspaper

, the

real estate company

surprisingly

pays

outstanding interest on bonds abroad over 83.5 million dollars (about 71.8 million euros). Accordingly, all creditors would receive their money by tomorrow, Saturday. With the payment directly before the expiry of a grace period, the group was able to avert default in payment at the last minute. 

However, the cow is far from off the ice.

In total, Evergrande has accumulated a mountain of debt of the equivalent of 260 billion euros in the years of aggressive expansion.

Further payments are due by the end of 2021 - experts do not assume that the heavily indebted group can meet all of them.

According to the respected Chinese business

106 billion euros will be due within the next 12 months.

Evergrande has a maximum of a tenth of that in cash.

The real estate giant is facing a dramatic rescheduling or even bankruptcy. 

“A bankruptcy would be a financial tsunami,” writes

. Evergrandes “Liabilities are roughly 2 percent of China's gross domestic product. It has more than 200,000 employees. These and many of their family members have invested billions of yuan in the company's wealth management products. " More than 800 Evergrande residential complexes are under construction, 500 of which are still due to outstanding payments to construction companies, writes the magazine in a large report on the crisis group. Thousands of Evergrandes suppliers, service providers or customer companies employed another 3.8 million people every year. It is no wonder that some analysts are already comparing Evergrande with Lehman Brothers - the US bank whose collapse in 2008 sparked the global financial crisis.

It is unclear whether the comparison works.

A collapse of Evergrande could wreak havoc on the real estate sector and possibly affect the entire Chinese economy *.

How much can only be guessed at as things stand.

Evergrande: Share crash and failed sale of the majority of a subsidiary on Thursday

In any case, Thursday was dramatic. Evergrande had insisted on resuming trading of its shares on the Hong Kong Stock Exchange, which had been suspended in early October. The share price plummeted by almost 13 percent. By the compulsory break, it had lost 80 percent from its peak. Evergrande also had to announce that the planned sale of 50.1 percent of the shares in a profitable subsidiary * for real estate services to another Chinese developer called Hopson Development Holdings had failed. The business should flush the equivalent of 2.2 billion euros into the tight coffers. A week earlier, according to a report by the Reuters news agency, the sale of the Hong Kong Evergrande headquarters with a view of the harbor for just under 1.5 billion euros had failed.Apparently the provincial government of Guangdong - where Evergrande's Shenzhen * is located - did not approve the transactions. She is responsible for overseeing the restructuring of the group

The central bank has tried to calm down in the last few days *.

Most recently, central bank governor Yi Gang emphasized on Wednesday that the dangers posed by Evergrande are manageable.

There are reports that the central bank has directed credit institutions to keep lending to healthy real estate firms.

Behind the scenes, authorities are also said to urge companies to buy Evergrande assets to raise cash for the group.

It is unclear what is true of this.

Evergrande: Also other real estate companies in the wake of the crisis

In addition to Evergrande, other real estate companies are now in trouble: Companies with names like Fantasia, Modern Land or Sinic had to let payment deadlines pass. Most companies are heavily indebted. Potential home buyers are therefore becoming increasingly suspicious and hesitant. China's * house prices fell for the first time in six years. The prices for new buildings in 70 cities - excluding social housing - fell by 0.08 percent in September compared to August, as the National Statistics Office announced on Wednesday. The values ​​on the secondary market fell by 0.19 percent. In September and August, according to the

news agency, apartment

16.9 percent and 19.7 percent respectively below the level of the respective months of the previous year.

already suspects a vicious circle: The poor financial situation of the companies leads to falling demand for housing, which in turn leads to even worse finances for the companies. The weakest are the first to be drawn into the downward pull of Evergrande.

The macroeconomic consequences can currently only be guessed at. The government has hardly commented so far. She had started the fall of Evergrande through tougher financial rules for the real estate sector *. The rules should stop over-indebtedness and speculation. For Evergrande, they meant that it could no longer issue bonds to service debts. "Given the size of the debt, any assumption that the central government will do nothing reflects a lack of understanding of how things work in China," Chen Zhiwu, a professor of finance at Hong Kong University, told the

.

Helge Berger, head of the China Mission of the International Monetary Fund (IMF), sees it similarly: "People understand that the government has the instruments to contain the risks in the future," said Berger on Wednesday on

.

So far, risks have been limited to the real estate sector, but authorities should continue to monitor the situation if it escalates. 

Evergrande: Funded by equity and with the help of employees

Many of the acute problems become clearer when you look at how Evergrande financed itself. The company had been clammy for years and had to be creative in order to stay afloat. Banks only gave the group loans for a project if managers also invested money out of their own pockets for it, writes

. Evergrande urged employees and their families to buy wealth management products from a subsidiary in order to make money. The company promised high returns, which it could not pay at all. Employees had to accept deferred payments: According to

around 40 billion yuan of such paper is

currently

due, around 5.3 billion euros.

Some construction companies have paid Evergrande with commercial papers, mostly with a term of six months and promised high interest rates, writes the magazine.

But these papers quickly lost their value.

Some of those affected therefore went to court or negotiated some sort of settlement.

Most recently, Evergrande used apartments as a means of payment.

Jiangsu Nantong Sanjian Construction Group built several Evergrande projects.

As of September, the group owed the construction company

around 20 billion yuan,

almost 2.7 billion euros,

according to

.

Evergrande: Bankruptcy hits home buyers, investors and construction companies

This shows that if Evergrande goes bankrupt, this not only affects apartment buyers and investors, but also construction companies, some of which have put their own money into the projects. According to

China's Housing

monitoring

Evergrande bank accounts

since September

to prevent funds intended for housing construction from being diverted to creditors. Construction companies should be paid first to ensure the completion of the projects, it said. In some cases, Beijing is now also urging affected municipalities to somehow complete the Evergrande residential complexes there *. 

Meanwhile, Evergrande is frantically trying to get some money. But so far it has hardly been possible to sell real estate, assets or subsidiaries. And there is one thing the company does not sell: its land. Evergrande has hundreds of valuable lots that it is actually planning construction projects on. "In China, land reserves are the most valuable asset ever," said Du Liang, Evergrande's chief asset

at a staff meeting in September,

according to

. ““ This is Evergrande's greatest advantage and last resort. “Evergrande founder Xu Jiayin therefore continues to believe that he can revive the group if he can only build and sell houses on the land. Hope always dies last.