International investors holding dollar-denominated bonds from Chinese property developer China Evergrande Group have yet to receive interest payments expected on Thursday. The company was supposed to return $ 83.5 million to investors in coupon payments on September 23.
Western media, citing knowledgeable sources, reported that bondholders had not received their due payments as of Friday morning in Hong Kong. The developer can make payments later: the company has a 30-day grace period before the default is announced, which will be the largest in history for Asian companies, writes The Wall Street Journal. That said, back in June, Evergrande claimed that it had never missed a bond interest payment date since it was founded in 1996.
The Chinese government has called on regional authorities to urge them to prepare for the potential economic and social impact of the collapse of Evergrande, the WSJ reported. This suggests that Beijing is not seeking to provide financial assistance to the developer, but wants to avoid social instability and problems for those citizens who may be affected by the bankruptcy of the company.
Evergrande is on the brink of default after years of explosive growth and heavy borrowing. The decline in sales, as well as the actions of Beijing to curb the recovery of the Chinese housing market, contributed to the fact that the company found itself in a crisis situation. At the end of June, her debt was $ 304 billion. Since the beginning of this year, Evergrande shares, which are traded in Hong Kong, have lost more than 82%. The stock jumped 16.7% on Thursday as Evergrande’s largest division, Hengda Real Estate Group Co. – announced the payment of interest on bonds in yuan.
Meanwhile, on Friday, Evergrande shares declined again, dropping 13.5%. The intensity of the situation around the debt problems of Evergrande is having a serious impact not only on the Chinese stock markets, but also on the global ones. This is mainly due to the fact that if the company fails to pay the interest payments, the foreign bondholders of Evergrande will suffer losses. This will raise questions about their financial viability and may lead them to start selling their other assets to raise funds. As a result, supply will rise, affecting the dynamics of seemingly unrelated markets.