Lending rates are becoming a problem: Evergrande barely survives default

Friday 29 October 2021

Lending rates are becoming a problem
Evergrande barely survives the default

Payment default hangs dangerously on highly indebted real estate conglomerate China Evergrande. Other times, the company is only able to make last-minute interest payments on its loans. However, experts do not see the risk of a chain reaction averted for China’s economy.

Ailing Chinese real estate conglomerate Evergrande has again averted a last-minute lapse. Shortly before the deadline, the group paid the interest due on a foreign bond, as reported by financial news agency Bloomberg. $47.5 million (40.6 million euros) therefore flowed on Thursday, with the deadline ending Friday.

The payout came as Evergrande averted a costly default last week by transferring $83.5 million in coupon payments to an escrow account. Further payments will be due in the coming weeks. Evergrande did not wish to comment.

Evergrande is sitting on a mountain of debt equal to about $300 billion. Given the size of the liabilities, financial markets have recently been concerned that the collapse of the conglomerate could set the Chinese real estate sector on fire. Failure to pay interest may result in formal default by the company and default on other Evergrande Dollar bonds.

But according to analysts, the cow is not far from the snow despite what has been paid now. Cliff Zhao of China Construction Bank International in Hong Kong said, “Evergrande has made every effort to solve its liquidity problems. But it is already difficult to raise enough capital to be able to meet all the debt. ” He expected further talks between Evergrande and the lenders.

It is still unclear whether the Chinese state will take steps to prevent bankruptcy. However, the Chinese central bank recently assured that Evergrande’s risks to China’s economy were “manageable”. Bloomberg recently reported that Beijing is prompting Evergrande boss Xu Jian to bail out the company with money from his personal wealth.