![]() This will negatively impact China’s growth and world markets. “It’s massed more than $300 billion in liabilities and has failed to make payments due on U.S. Evergrande currently has about half that amount. When Lehman Brothers filed for bankruptcy in 2008, it had $617 billion in debt. A sudden dismantling without any outside aide will likely send disastrous rippling effects across the Chinese economy and global financial markets. Now, the ball is in their court to come up with some form of restructuring proposal,” Michel Löwy, CEO of Hong Kong-based SC Lowy, an investment firm that owns Evergrande bonds, told The New York Times on Thursday.Įvergrande employs more than 200,000 people in China and sustains 3.8 million jobs in related industries, according to its website. ![]() “We all expected that Evergrande was not going to be able to pull a rabbit out of their hat. The central bank has previously said Evergrande’s crisis is a consequence of “its own poor management and reckless expansion.” On Thursday, China’s central bank chief Yi Gang said the Evergrande meltdown is a “market incident which will be properly handled in accordance with the principles of marketization and rule of law,” suggesting that Beijing has no plan to interfere. But such a prospect looks increasingly unlikely. The company’s foreign bondholders, as well as many homebuyers in China who have paid for Evergrande apartments that are yet to be built, have been hoping for a government bailout. Some form of restructuring is to be expected. ![]() It’s unclear what Evergrande’s next step will be. Fitch said Evergrande had not responded to its request for confirmation about those payments. On Tuesday, Reuters reported that some of Evergrande’s overseas bondholders said they had not received coupon payments that were due on Monday. Since then, Evergrande has been increasingly quiet about whether and when it can pay interests on time, forcing the financial world to turn to bondholders and ask if they have received money. Its imminent trouble surfaced in September when the company said it had no cash to cover several upcoming interest payments on dollar bonds. Regulators in Beijing are trying to reassure markets that the world’s second-largest economy can weather the crisis at Evergrande and its smaller rivals, with Vice Premier Liu He becoming the highest-ranking official to assure that risks in the property market are controllable.Evergrande is one of China’s largest and most indebted property developers. At least three developers defaulted on their dollar debt this month as junk bond yields surged to a decade-high.Ī gauge of Chinese real estate companies rallied 2.1%. A government clampdown on leverage at indebted developers and measures to cool home prices have spurred a slump in sales and weighed on economic growth. Payment of the coupon may ease concern over the health of China’s property sector. It needs to pay interest on another four dollar notes this year. Evergrande has a hefty wall of maturing debt next year with some $7.4 billion coming due in onshore and offshore bonds. The company has more than $300 billion in liabilities. Evergrande said late Wednesday that its property sales plunged about 97% during peak home-buying season and that it may not be able to meet its financial obligations. The recent collapse of talks to sell a stake in a unit for $2.6 billion has highlighted the difficulty the company faces raising funds through asset sales.
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