China’s beleaguered real estate giant Evergrande made a key overseas interest payment one day before the weekend’s deadline, state media said on Friday, avoiding a default and buying the beleaguered company a pardon as it struggles under a mountain of debt.
The crisis at one of the nation’s largest real estate developers has hit investor sentiment, shaken up the key housing market and fueled fears of a spillover in the broader economy.
Evergrande is reported to have lost at least $ 150 million in overseas bond payments and, although it had a 30-day grace period for some of them, there was a general expectation that it would not be able to meet its obligations.
However, on Friday, the state-backed Securities Times said the developer had transferred $ 83.5 million for an overseas payment due first on September 23, citing “relevant channels.” He said bondholders would receive payment before Saturday, the end of the grace period.
The news comes just a day after the company said the planned sale of its $ 2.58 billion real estate services arm fell through, warning that it could not guarantee it would meet its debt obligations, setting it up for default. and a possible restructuring.
Fears about Evergrande’s bankruptcy have rocked the markets and the company’s shares have tumbled more than 80 percent since the beginning of the year. It rose more than four percent on Friday in Hong Kong.
But observers warned the company was still reeling, with several other dollar bond payments yet to navigate before the end of the year.
“They may be able to pay this interest, and maybe they can pay other interest, basically they have an interest payment every two weeks or so, but at some point … there will be an amount of principal that is due, and that is a billionaire. “Chen Long, a partner at the research firm Plenum, told AFP.
“If you look at the fundamentals of the company, that has not changed.”
Beijing last year began cracking down on the country’s colossal real estate sector (estimates say it accounts for a quarter of the economy) in a bid to curb excessive borrowing, with measures to restrict lending that cut off the capacity of companies. companies to complete projects.
While Evergrande stands out, the moves have hit a number of other developers, with several including Sinic and Fantasia among those who failed to make debt payments.
Still, Chinese leaders insist the fallout can be contained, but the crisis has sparked rare public anger and protests from eager home buyers, suppliers and investors.
But Chuanyi Zhou, a credit analyst at Lucror Analytics in Singapore, said the latest news would give the market a short-term boost, but Beijing was not expected to step in to prop up the company.
“Based on recent polls by regulators, it appears that the government, while wanting Evergrande to meet its obligations, is unlikely to provide any support,” he said.
Authorities have reportedly called on local governments to prepare for Evergrande’s potential collapse, while analysts have said authorities had already taken control of some of its real estate projects.
“From a macro perspective, whether or not the dying Evergrande shell survives is simply not important; the important thing is who bears what responsibilities, or not,” Leland Miller, CEO of data analytics company China Beige, told AFP. Book.
“It’s been pretty clear from the start that a lot more pain will come.”