For the first time, Evergrande has failed to repay its creditors, said the Bloomberg agency on Tuesday, when the Chinese state invites itself at the head of the ultra-indebted real estate developer to avoid bankruptcy.
A private sector heavyweight in China, Evergrande is drowning in around € 260 billion (around C $ 370 billion) in debt. The group has struggled for several months to honor its interest payments and deliveries of apartments. On November 6, he should have repaid US $ 82.5 million. Evergrande had a grace period of an additional month to get into good standing. The deadline ended at midday on Tuesday, according to Beijing time.
According to Bloomberg, several foreign creditors have still not been paid. That would make it Evergrande’s first default, which at this point has not commented. Already in September, the group had been unable to meet several deadlines and had suspended its listing on the Hong Kong Stock Exchange. But Evergrande had managed to repay its creditors before the expiration of the grace period.
Sure of its financial strength, Evergrande had invested in recent years in a multitude of sectors (tourism, digital, health insurance or electric car), which partly explains its abysmal debt.
But the Chinese authorities, worried about the swelling of the debt in the real estate sector, last year imposed prudential ratios on developers to reduce their recourse to borrowing. This regulatory tightening marked the beginning of financial worries for Evergrande. In September, the firm admitted for the first time that it might not be able to honor all of its commitments. And, a rare thing in China, dozens of injured owners, not having received delivery of their apartment, demonstrated for several days in front of the group’s headquarters in Shenzhen.
Monday evening, the promoter announced the creation of a “risk management committee” which will include five heads of public companies, and therefore indirectly the state. This group has a total of seven members. Its mission will be to “reduce and eliminate future risks” for the promoter, whose possible bankruptcy would be the biggest ever recorded for a Chinese company.
So far, the Communist authorities have not indicated whether or not they intend to fly to the aid of the private group. But he is ready to play a leading role in stemming the crisis, note several analysts contacted by AFP. The intervention of the power marks “the official beginning of the restructuring of the debt of Evergrande”, wants to believe the analyst Lu Ting, of the bank of investment Nomura. On Friday, authorities in Guangdong province, where Evergrande is headquartered, announced that they would send a task force to its head “to oversee the management of business risks.”