Why global investors are focused on Evergrande
Hong Kong (CNN Business)Evergrande stayed silent Tuesday about its fate after reportedly failing to make interest payments on another international bond, the third such deadline it appears to have missed in recent weeks.
The sprawling Chinese real estate conglomerate was due to make payments of about $148 million on US dollar-denominated bonds on Monday. It did not immediately respond to a request for comment Tuesday.
Evergrande is China’s most indebted developer, with $300 billion worth of liabilities. It has already likely missed payments on two other US dollar-denominated bonds, fueling speculation over whether the company could collapse. The first of those came due September 23, from which Evergrande had a 30-day grace period — a deadline that is drawing closer.
Without a bailout or restructuring, it is heading rapidly for default — an outcome that could send shockwaves through Chinese markets and the wider economy.
The company’s woes are emblematic of a bigger real estate crunch in China.
Evergrande’s latest deadline coincided with news from another developer, Sinic Holdings, on Monday that it would “likely” default on some of its bond payments due this year, which amount to $250 million. The principal payment and last interest payment on those bonds are due next Monday.
“Having given careful consideration to its liquidity, the company currently anticipates that it will not have enough financial resources,” it said in a stock exchange filing.
On Monday, Fantasia Holdings, a Shenzhen-based developer of luxury apartments that defaulted on some bond payments last week, said that two of its independent directors, Ho Man and Priscilla Wong Pui Sze, would step down effective immediately.
In a Hong Kong stock exchange filing, both directors said that they had “no disagreement with the board.” But the company disclosed that Ho had “expressed concern that he had not been kept fully informed of certain crucial matters of the company in a timely manner.”
Fantasia made headlines after revealing that it had missed hundreds of millions of dollars in debt payments. That exacerbated concerns that debt woes were deepening in China’s overextended property sector.
On Monday, those fears intensified as Modern Land, another property firm, appeared to crack. It asked investors for more time to pay back a $250 million bond, saying it needed to improve “liquidity and cash flow management and to avoid any potential payment default.”
Evergrande shares were suspended last week amid reports that a rival Chinese developer was preparing to buy its property management business. The stock has already crashed by 80% this year.
— Jill Disis and Laura He contributed to this report.
Source: Read Full Article