The real estate company is sitting on a mountain of debt worth $ 300 billion.
(Photo: Reuters)
Beijing Evergrande has apparently made pending interest payments again shortly before a deadline. As the financial news agency Bloomberg and the “New York Times” unanimously report, bondholders have received an overdue interest payment that would have been due today, Friday. It was a coupon payment of $ 47.5 million.
It is the second time in a very short time that Evergrande has averted an impending payment default. Just last week, according to media reports, the company paid $ 83.5 million in interest on an offshore bond shortly before a grace period expired. However, this does not mean the all-clear for the heavily indebted real estate company.
Evergrande has more than $ 300 billion in debt on its balance sheet. There is also speculation about further off-balance sheet debts. In the past few months, the company had made several attempts to raise liquid funds, for example by selling real estate or investments.
Evergrande isn’t the only real estate developer struggling with payment issues right now. This week alone, the rating agency Fitch downgraded two companies in the industry: the Yango Group and the Kaisa Group. In both cases, Fitch cites limited access to finance as the reason. Other real estate developers such as Modern Land or Fantasia have also recently fallen into arrears.
Top jobs of the day
Find the best jobs now and
be notified by email.
The reason for the adjustment in China’s real estate market is the increasing regulation of the industry by the Chinese government. In the past few months, it had taken some measures to cool the country’s hot real estate market. Home loans have been made more restrictive and, particularly at the local level, more restrictions have been imposed on private individuals to buy property.
However, a measure at the end of 2020 is seen as the key moment in which the entire sector began to falter. At that time, the government imposed new credit restrictions on property developers, the so-called “three red lines”. As a result, the entire industry had to reorganize its financing.
Beijing only made it clear at the beginning of the week that the companies themselves must be responsible for their payment obligations. As reported by the Bloomberg news agency, officials from the National Development and Reform Commission and the State Foreign Exchange Service told developers at a meeting in Beijing on Tuesday that they should make their payments on time if possible. In addition, the billionaire founder of Evergrande Hui Ka Yan was asked to use his personal fortune to overcome the crisis in the company.
More: The Evergrande case is also a lesson for investors