350 Trillion Won Debt 'Liquidity Crisis' Hengda... Must Pay 50 Billion Won Bond Interest on the 29th

▲Evergrande Group [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] China’s real estate developer Evergrande Group, burdened with debt amounting to 350 trillion won and facing a severe liquidity crisis, will face another bond interest payment date on the 29th, with an amount in the 50 billion won range.

Previously, on the 23rd, Evergrande barely managed to temporarily contain the situation without an official default declaration after failing to properly pay bond interest to investors, but now it is encountering another liquidity hurdle.

According to major foreign media on the 27th, Evergrande must pay $47.5 million (approximately 55.9 billion won) in interest on its dollar bonds maturing in 2024 on the 29th.

At present, there is no sign that Evergrande’s liquidity issues will be resolved through additional investment attraction or other means, making it uncertain whether Evergrande can fully pay the scheduled interest to bondholders on that day.

Evergrande also failed to properly pay bond interest during the first critical moment on the 23rd.

On the 23rd, Evergrande was supposed to pay $83.5 million (approximately 98.2 billion won) in dollar bond interest and 232 million yuan (approximately 42.2 billion won) in yuan bond interest to bondholders.

Evergrande did not pay the dollar bond interest on that day, but due to a contractual 30-day grace period, it is not yet officially considered to have defaulted.

Evergrande also stated that it “resolved” the issue through individual contact with yuan bond-holding institutions, but the market analyzed that it likely did not fully pay the interest, instead employing a stopgap measure such as privately negotiating with bondholders to extend the full or partial payment deadline.

With little chance of a breakthrough in Evergrande’s financial situation, some in the market speculate that Evergrande will eventually declare an official default on some bonds and hand over all or part of its core real estate business to state-owned enterprises under government control.

The crisis continues not only at Evergrande’s headquarters but also among its affiliates.

Evergrande’s electric vehicle company, Evergrande Auto, confirmed that it failed to pay part of employee salaries and payments to partner companies, facing a serious financial crisis, and announced that it is continuously seeking strategic investors to inject funds.

It is known that Evergrande is pursuing a plan to transfer its non-core affiliate Evergrande Auto to other companies such as Xiaomi.

As the Evergrande crisis rapidly emerges as a risk factor for the Chinese economy, Liu He, Vice Premier of the State Council and economic advisor to President Xi Jinping, did not specifically mention Evergrande’s default crisis but emphasized that the Chinese economy remains stable.

At the opening ceremony of the World Internet Conference held on the 26th in Wuzhen, Hangzhou, Zhejiang Province, Vice Premier Liu said, “China’s macroeconomy is generally stable, and we have experience and the capability to manage and control risks, so the development outlook is very bright.”

However, Chinese authorities have yet to show a clear stance on whether to actively intervene in the Evergrande situation or let Evergrande go bankrupt while still observing the situation.

Meanwhile, the central bank, the People’s Bank of China, appears to be attempting to ease market anxiety by expanding liquidity supply.

The People’s Bank of China, after supplying an additional 270 billion yuan (approximately 49 trillion won) in liquidity through open market operations last week, also supplied an additional 100 billion yuan in liquidity to the financial sector on Monday the 27th through reverse repurchase agreements (reverse repos).