China's Evergrande crisis: clock ticking as crucial debt deadline looms

Asia's Tech News Daily

© Provided by The Guardian Photograph: Héctor Retamal/AFP/Getty Images

The rescue of embattled Chinese property company Evergrande appears to have stalled, leaving the developer on the brink of default and threatening to unleash contagion through the country’s giant real estate sector, home prices and the economy.

The problems enveloping Evergrande, which has eyewatering total debts of $305bn, have hung over global financial markets in recent weeks and helped curb China’s post-pandemic recovery.

But the crisis could deepen further if Evergrande fails to meet a deadline of Saturday night to stump up a $83.5m bond interest payment, triggering an official default.

Evergrande has already been given a 30-day grace period to make the repayment after missing the initial deadline back in September. It has since missed other key offshore, dollar-denominated bond payments worth another $193.3m. The clock is now ticking on those debts as well.

Related: China’s Lehman Brothers moment?: Evergrande crisis rattles economy

The sprawling property-to-electric-cars empire founded by former steel executive Xu Jiayin in the mid-90s has been scrambling to offload assets in order to pay back some of its loans. Its Chinese creditors are expected to be prioritised, with foreign investors at the back of the queue.

Shares in its main Hong Kong listing have lost 80% in the past year and have been suspended since 4 October pending an announcement on how it is going to be rescued.

But there were signs that the process has not been running to plan, raising the prospect that Beijing will be forced to engineer a dismantling of Evergrande, the country’s second-biggest developer, by absorbing most of it into existing state-owned enterprises.

First, Evergrande’s negotiations to sell its 51% stake in its profitable property management unit, Evergrande Property Services Group, to another Chinese developer for $2.6bn have been suspended, according to reports. The buyer, Hopson Development Holdings, reportedly could not obtain the necessary agreement from the provincial government in Guangdong, which is overseeing Evergrande’s restructuring.

The sale of Evergrande’s 26-storey waterfront headquarters in Hong Kong was expected to raise another $1.7bn but the deal with Yuexiu has also reportedly been placed on hold for the same reason.

The state of the property market, which accounts for about 25% of the Chinese economy, makes for an alarming backdrop to these problems. Home sales by value tumbled 16.9% in September from a year earlier, after a 19.7% drop in August, according to Bloomberg calculations based on official data released on Monday.

© Provided by The Guardian Evergrande’s debt woes have rattled financial markets around the world. Photograph: Noel Celis/AFP/Getty Images

With many other developers also feeling the squeeze and struggling to repay loans, the potentially colossal default of Evergrande could capsize the weakest, most debt-laden parts of the property sector.

China Properties joined a dozen others that have defaulted on over 47bn yuan ($7.3bn) of bonds this year, per an estimate from CRIC, a Chinese property consultancy, Reuters reported on Friday. S&P Global last week downgraded two of the bigger players, Greenland, which has extensive developments in London, Sydney and New York, and E-house Enterprise.

© Photograph: Héctor Retamal/AFP/Getty Images The crisis threatening Evergrande and China’s economy could deepen if the firm fails to make an $83.5m bond interest payment on Saturday.

A smaller developer, Sinic Holdings, became the latest to have its rating put in “selective default” by S&P after it defaulted on $246m in bonds, having warned it was likely to do so last week.

Terry Chan, a senior research fellow at S&P Global Ratings, said the situation risked exposing other large Chinese companies that have expanded in similarly rapid fashion on the back of the three decades of debt-fuelled, breakneck economic growth.

“Should Evergrande default, there may be contagion effects for other developers, home prices, and the economy. Evergrande’s cashflow troubles foreshadow what could go wrong for liquidity-challenged Chinese corporates,” he said.

China’s corporate sector accounts for almost a third (31%) of global corporate debt, according a survey by S&P of 25,000 companies across the world. The sector’s debt-to-GDP leverage ratio of 159% is one of the world’s highest – the current global ratio is 101% – and presents a staggering $27tn headache for Beijing.

Related: The party’s over: China clamps down on its tech billionaires

China’s president, Xi Jinping, has shown in recent years that he is determined to tackle the issue as he pursues his goal of “common prosperity”. He has clipped the wings of tech billionaires such as Jack Ma with firms forced to offload assets and concede control over data to regulators. Highly profitable private tutoring services beloved by China’s ambitious city-dwelling parents have been outlawed too.

Now the property sector’s “speculative” model is in Xi’s sights. Last year’s “three red lines” for balance sheets made it much more difficult for large developers such as Evergrande to secure the funding to keep the plates spinning on its borrow-and-build model.

However, Angus Coote of Jamieson Coote Bonds in Melbourne, Australia, said China’s central bank was “on the front foot”, flooding the market with liquidity – another 100bn yuan ($15.6bn) on Wednesday – and would contain the contagion.

“Banks have been told to keep lending to healthy developers,” he said. “The biggest ones can cause a ripple effect … but it’s manageable without any contagion is our view. Beijing is going to let it down slowly.”

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

More restrictions could be needed to tackle 'worst Covid' in UK, warns Patrick Vallance

More restriction could be needed to tackle the Omicron Covid-19 variant if it is found to spread very quickly, Sir Patrick Vallance has warned. Boris Johnson announced the return of ... Read more »

Omicron: Mask-wearing back for shops and transport and PCR tests for all arrivals, PM announces

© PA Coronavirus – Sat Nov 27, 2021 People are being ordered to wear masks in shops and on public transport again in response to the arrival of the Omicron ... Read more »

Eidgenossen geben Einblick ins Portemonnaie: So spart die Schweiz

Wie viel legen die Schweizerinnen und Schweizer pro Monat auf die Seite? Wofür wird gespart? Und wie hat sich Corona auf das Portemonnaie ausgewirkt? Eine grosse Spar-Umfrage der Migros Bank, ... Read more »

Glühwein. Schon klar. Ihr wollt jetzt alle Glühwein. Also gut – hier die Rezepte

© shutterstock Teaserbild Kaum haut die nasskalte Jahreszeit rein, haben alle urplötzlich das Bedürfnis, draussen herumzustehen und süssliche, vage alkoholhaltige Heissgetränke zu schlürfen. Am liebsten auf’m Weihnachtsmarkt. Dort ist es ... Read more »

Search continues for Tacoma Mall shooter

A police office guards an entrance to the Tacoma Mall on Friday. Gunshots rang out in the shopping center earlier in the evening. The search for the shooter who terrorized ... Read more »

Cyber Monday Sky-Watcher telescope deals: Discounts & what's in stock

Cyber Monday is almost here and when it comes to Cyber Monday Sky-Watcher telescope deals, it’s a case of quality over quantity. Although there aren’t a ton of Sky-Watcher telescope ... Read more »

City says it will finally clear ‘squatter' from hazardous basement pad

The city will finally boot an alleged Brooklyn basement squatter — more than four months after declaring his pad illegal and “hazardous.” The move by the Buildings Department comes amid ... Read more »

Two Manchester United players at risk of suspension in Chelsea fixture

Manchester United duo Luke Shaw and Fred will find themselves walking a disciplinary tightrope if they recover from their respective injuries in time to face Chelsea on Sunday afternoon at ... Read more »

Steven Gerrard fires Man City warning after nailing Crystal Palace game plan

Steven Gerrard is not resting on his laurels after promising to go to work tomorrow in preparation to upset Man City at Villa Park in midweek. Gerrard made it two ... Read more »

Lewis Hamilton may be helped by ‘interesting' Saudi GP track in Max Verstappen title fight

Lewis Hamilton will be looking to register his third successive Grand Prix victory by taking the chequered flag ahead of Max Verstappen in Saudi Arabia next weekend. The Mercedes man ... Read more »

Hibs boss has say on Kevin Nisbet, Scott Allan and Jamie Murphy after huge win over St Johnstone

Hibs manager Jack Ross hailed his three matchwinners in Kevin Nisbet, Jamie Murphy and Scott Allan after the capital club struck late to defeat ten-man St Johnstone 2-1 at McDiarmid ... Read more »

Black Friday microwave deal 2021: Get 60% off the Hoover chefvolution

Cook meat, fish or side dishes easily with this handy appliance (The Independent) The humble microwave has been a kitchen staple for the past five decades – unless you were ... Read more »

UPDATE 2-BioNTech says it expects more data on new variant in two weeks

* Looking for signs that warrant a vaccine redesign * BioNTech says understands experts' concerns * BioNTech, Pfizer in effort to establish relaunch routine (Adds detail, shares) By Ludwig Burger ... Read more »

Eric Zemmour pictured giving the finger to member of public on promotional tour

Hard-right political talk-show star Eric Zemmour arrives to visit the Major Cathedral in Marseille, southern France – Daniel Cole/AP Eric Zemmour’s journey towards the French presidential elections took a lively ... Read more »

I've Used My Oven Just 3 Times in the Last 5 Months Because of This Under-the-Radar Air Fryer

© Amazon Grab it while it’s on sale for under $100. © Provided by Food & Wine Amazon I’m a terrible cook, so much so that my dad jokes that ... Read more »

Magh Mela-2022: Only fully vaccinated pilgrims to be allowed to attend, camp at fair

© Provided by Hindustan Times Workers busy levelling the ground for the tent city of Magh Mela-2022 on the banks of Sangam in Prayagraj (HT Photo) Only fully vaccinated pilgrims ... Read more »

Delhi air stays ‘severe' for second day, relief not likely till tomorrow

© Provided by Hindustan Times A view of traffic Delhi recorded an AQI of 402 on Saturday. (Sanjeev Verma/HT PHOTO) New Delhi: Delhi’s air pollution levels remained in the ‘severe’ ... Read more »

Cases against kin cannot be ground for revoking arms licence: Bombay High Court

© Provided by Hindustan Times A single judge bench of the Bombay High Court said under section 17(3) of the Arms Act, 1979, the licensing authority can suspend or revoke ... Read more »

Austrian police arrest 15 suspected people smugglers

© Provided by dw.com Austrian police have arrested over 330 people smugglers so far this year Austrian police have arrested 15 people accused of being part of a criminal group ... Read more »

Delhi's 12-day streak of no Covid-19 death ends as one succumbs to infection

© Provided by Hindustan Times Delhi reported 27 fresh Covid-19 cases on Saturday. (Sanjeev Verma / HT Photo) Delhi on Saturday reported death due to coronavirus disease (Covid-19) after a ... Read more »

Omicron strain: List of countries that have reported new 'variant of concern' of COVID-19

© Provided by DNA The new COVID-19 ‘variant of concern’ named Omicron by the World Health Organisation (WHO) has created an atmosphere of uncertainty related to transmissibility, vaccine effectiveness, and ... Read more »

Amid Omicron variant threat, THIS is how Indian states are gearing up with necessary measures

© Provided by Pinkvilla World Health Organization renamed B.1.1.529 strain of the coronavirus that emerged from South Africa as “Omicron”. Although the cases were declining until now, the new variant ... Read more »

Face masks MUST be worn in shops and public transport - but NOT pubs

© Provided by Daily Mail MailOnline logo The Prime Minister announced today that face masks will be compulsory on public transport and in shops as part of his crackdown to ... Read more »

Ahead of S-400 Triumf missile system delivery, China monitors India's defence preparedness

© Provided by Zee News As the date of delivery of S-400 Triumf surface-to-air missile systems from Russia to India approaches, China’s concern is growing. China is constantly monitoring India’s ... Read more »

Dr. Jitendra Singh launches Covid vaccine delivery by drone

© Provided by The Statesman Dr. Jitendra Singh launches Covid vaccine delivery by drone Launching the Drone driven aerial delivery facility to transport COVID vaccine, as well as emergency medicines ... Read more »

Part of an iconic London landmark is being turned into a bar

London is home to some seriously quirky drinking spots, from the prison bar at ‘Alcotraz’ to the Wild Western experience at East London’s Moonshine Saloon. And now London has got ... Read more »

SWS: 45% of Filipino families rate themselves poor in September

© Social Weather Stations SWS: 45% of Filipino families rate themselves poor in September 2021 A new Social Weather Stations (SWS) poll found 45% of Filipino families considered themselves poor ... Read more »

Loose Women star Stacey Solomon shows off new hair look

© ITV Loose Women star Stacey Solomon has debuted a new red hairdo — reminiscent of Disney’s The Little Mermaid. Loose Women star Stacey Solomon has debuted a new ‘do ... Read more »

A new, different wave of the opioid epidemic is here — and it involves fentanyl

The spike of drug overdose deaths this year and last year has many drug abuse and addiction researchers, doctors and health officials worried about a growing trend among overdose victims ... Read more »

Three killed during Storm Arwen as 100mph gusts cause major disruption

Three people have been killed as Storm Arwen brought gusts of almost 100mph, causing road closures, train delays and power cuts across the UK. © PA Wire Autumn weather Nov ... Read more »

Queensland Human Rights Commission flooded with inquiries due to Covid border confusion

Photograph: Jono Searle/AAP Commissioner says lack of detail has ‘created a vacuum where misinformation is able to be spread’ Get our free news app; get our morning email briefing The ... Read more »

They Died From COVID. Then the Online Attacks Started.

FILE – In this file photo dated Friday, April 23, 2021, the Facebook app is shown on a smartphone, in Surfside, Fla. Facebook’s parent company, Meta, says it will remove ... Read more »

Body of missing Montana man discovered Friday morning near Lowman after vehicle crash

The body of a Montana man who had been missing for more than two weeks was discovered Friday morning in Boise County, a few miles south of Lowman, according to ... Read more »

Accused rapist taking case to trial

Nov. 27—SUNBURY — A man accused of raping a 9-year-old girl wants to take the case to trial in Northumberland County Court. On Monday, Jose Figueroa-Cante, 36, of Northumberland, was ... Read more »

Afghan media collapsing after Taliban takeover, report says

The media industry in Afghanistan has collapsed since The Taliban resumed power. WAKIL KOHSAR/AFP via Getty Images The media industry in Afghanistan has collapsed with the return of Taliban rule. ... Read more »

Boris Johnson is ‘absolutely confident this Christmas will be better than last' amid new Omicron Covid variant fears

BORIS Johnson told the nation that he is “absolutely confident this Christmas will be better than last” amid fears over the Omicron Covid variant. Introducing new Covid restrictions, the PM ... Read more »

'Unbelievably awkward!' Johnny Depp was not happy with one Pirates of the Caribbean scene

In 2003 Disney introduced the world to Captain Jack Sparrow in the first Pirates of the Caribbean film, The Curse of the Black Pearl. Johnny Depp played the swashbuckling rogue ... Read more »

Biden slammed for $139K tree lighting as US struggles with inflation

© Provided by Daily Mail MailOnline logo The White House received backlash for shelling out $139,000 for this year’s Christmas tree lighting ceremony, topped with an additional $171,000 for the ... Read more »

Svenskeren says he hasn't found a new team for the League 2022 season

© Provided by Dot Esports After an extensive League of Legends career, veteran jungler Svenskeren couldn’t find a roster to join for next year, he revealed on Twitter today. It ... Read more »

Apex Legends Players Escape Storm Point Using Horizon Glitch

Storm Point arrived in Apex Legends as part of the Season 11 update, and the Gravity Cannons distributed all over its have proven popular points of experimentation. Fittingly, the gravity-focused ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic