China’s second-largest real estate developer Evergrande, which is reeling from the worst liquidity crisis, reportedly failed to pay interest on dollar-denominated bonds. Concerns are growing over Evergrande’s bankruptcy.
According to reports from Reuters and others on the 24th, Evergrande had to pay $83.5 million in interest on dollar bonds worth $2.03 billion by the previous day. However, foreign investors holding Evergrande’s dollar bonds did not receive interest until the morning that day.
Multiple sources said, “Interest has not been paid, and Evergrande has not responded to inquiries related to interest payments.” However, a 30-day grace period has been set under the bond contract, so no declaration of default has been made immediately.
Evergrande also announced the previous day that it has solved the problem of 232 million yuan in yuan bonds to be paid. However, it is widely expected that Evergrande did not pay interest properly, but only partially paid or extended the deadline through negotiations with creditors. Earlier on the 13th, Evergrande proposed repayment of △ cash installments, repayment of real assets, repayment of the balance of housing purchases as a bond repayment plan.
Chinese authorities are focusing on stabilizing the financial market instead of providing direct support to Evergrande. The People’s Bank of China supplied 70 billion yuan in short-term liquidity on the same day alone to stabilize the financial market, which was amplified by the Evergrande crisis, Bloomberg said. “The total amount of funds the People’s Bank of China has invested in the financial market over the past five days has reached 460 billion yuan.”
In response, the Chinese financial authorities recently urged Evergrande to complete its ongoing real estate development project as soon as possible and actively repay individual investors’ bonds, while taking all measures to avoid default on dollar bonds in the short term, the news agency reported. However, there was no circumstantial evidence that financial authorities would provide financial support to Hengda to fulfill their debts.
The Wall Street Journal also said the previous day, “Chinese authorities instructed local governments and state-owned companies to intervene at the last minute even if Hengda failed to manage the problem in an orderly manner.” Instead of direct support from the authorities, it seems to be preparing for the “backfire” of Evergrande’s bankruptcy.
Evergrande is currently carrying out about 800 real estate development projects in more than 200 cities in China, and some construction works have already been suspended due to unpaid payments to suppliers.