The fear of seeing a repeat in China, a scenario à la Lehman Brothers, the American bank whose bankruptcy precipitated the 2008 crisis in the United States and around the world, has greatly agitated financial centers in recent days. (Photo: 123RF)
The president of the ultra-indebted Chinese real estate giant Evergrande, whose possible bankruptcy could shake the economy, called on his group to “do everything possible” to honor its commitments, the official press reported on Thursday.
The private conglomerate is drowning in debt of 260 billion euros. A default could result in a sharp slowdown in China’s construction sectors and cause turmoil in global markets.
Pressed on all sides, Evergrande has been facing for several weeks, across the country, demonstrations by apartment buyers and angry investors demanding their housing or their money.
Group chairman Xu Jiayin gathered more than 4,000 company executives on Wednesday evening to urge them to “devote all their energy to resuming work and production and delivering real estate,” reported the China Securities Journal daily.
A time among the greatest fortunes in China, Mr. Xu also stressed that the group should “do everything possible to honor” its commitments.
The statements come as Evergrande faced a new deadline on Thursday: a payment of 83.5 million US dollars (71 million euros) in interest on a bond denominated in US currency.
Thursday evening at Chinese time, the deadline had passed without Evergrande having communicated on a possible payment.
If the deadline has not been honored, Evergrande will benefit from a grace period of 30 days before being declared in default of payment.
Unable to borrow on the financial markets, and short of liquidity, the group tried to reimburse some of its creditors in kind, notably by offering parking spaces and unfinished properties.
“It is only with a full and complete resumption of our work, our production, our sales and our operations that we will be able to guarantee the rights and interests of the owners of apartments and to ensure the payment of the investors”, a hammered Xu Jiayin Wednesday night, according to the China Securities Journal.
The fear of seeing a repeat in China, the world’s second-largest economy, a scenario à la Lehman Brothers, the American bank whose bankruptcy precipitated the 2008 crisis in the United States and around the world, has greatly agitated financial centers these last days.
All eyes are on the Chinese government, which has not specified whether or not it intends to intervene in favor of the private conglomerate.
According to financial agency Bloomberg, regulators recently advised Evergrande to focus on completing homes under construction and paying off individual investors, while avoiding a default on its dollar bonds.
But “there is no indication that regulators have offered financial support to Evergrande” for the interest due on Thursday, the agency wrote.
The central government called on local communities to “be prepared for a possible bankruptcy of Evergrande”, understands the Wall Street Journal for its part.
The giant promoter announced Wednesday that it had reached an agreement with Chinese bondholders on a small part of its debt, which has contributed to renewed optimism in the stock markets.
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