shine trader limited reports:
Investors can breathe a sigh of relief.
China Evergrande, the world’s most indebted real estate developer, avoided default after paying key interest in the 11th hour—at least for now. The cash crisis of the Chinese real estate developer has raised concerns about the global financial impact of its impending collapse.
The state-backed newspaper Securities Times reported on Friday that Evergrande had paid bondholders a sum of 83.5 million U.S. dollars, which was one day before the expiration of the 30-day grace period, which was one of the largest defaults in history. Pull back the edge of One.
The market is cautiously optimistic about this news, and Evergrande’s long-term prospects are uncertain. The company’s debt is still less than 300 billion U.S. dollars, accounting for about 2% of China’s GDP. Evergrande’s stock closed up 4.3% in Hong Kong.
“Although this is obviously a positive step, people want to see a viable plan for the next payment,” said Herrick, a New York law firm representing some Chinese real estate companies.
Feinstein’s partner Scott Mollen (Scott Mollen) said. “The basic problem still exists and needs to be resolved.”
China’s “control demolition” plan for Evergrande marks the end of its real estate boom
Beijing has been seeking to reassure the public this week, and senior officials have come forward to say that the risk of infection is controllable. Chinese Vice Premier Liu He and Central Bank Governor Yi Gang and others delivered speeches at Evergrande. It is rare for so many Chinese leaders to openly discuss the plight of a company.
“I think, in general, Evergrande risk is an isolated case,” Yi Gang said at the annual G30 International Banking Conference on Wednesday. “First, we will work to prevent spread to other real estate companies. Second, we will prevent spread to other parts of the financial sector.”
Evergrande was founded in 1996, and while accumulating a large amount of debt, it has reached the peak of China’s real estate boom. Its founder Xu Jiayin briefly became China’s richest man in 2017, and in 2018 Evergrande became the world’s most valuable real estate company.
The “Securities Times” report on Friday did not specify how Evergrande provided funding for interest payments, nor did it state whether there was government intervention. Evergrande did not respond to a request for comment. Analysts previously played down the idea that Beijing would intervene in the rescue, saying that the collapse of Evergrande would warn other companies that had too loose spending.
Evergrande missed a bond interest payment on September 23. It has 30 days to pay before it officially enters the default.
After Evergrande’s attempt to sell assets to raise cash failed on Wednesday, the default looked almost certain. Evergrande told the Hong Kong Stock Exchange that it was unable to sell a majority stake in its real estate services division to another Chinese developer, Hopson, because the two failed to agree on terms.
“In view of the difficulties, challenges and uncertainties in improving liquidity, there is no guarantee that the group will be able to fulfill its financial obligations,” Evergrande said in a document on Wednesday.
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The financial crisis in China’s real estate industry has begun to spread as developers with tight funds find themselves unable to obtain new loans. Several smaller developers defaulted this month, including Fantasia Holdings and Sony Holdings, which defaulted on their $250 million bonds due on Monday.
Fitch Ratings said in a research report on Thursday that the industry may see “substantial consolidation” and have an impact on home sales, which have long been the driving force of China’s economy.
“Rising uncertainty among potential home buyers will hurt sales in the short term,” Fitch said.
Investors once worried that the worst-case scenario was that the collapse of Evergrande might snowball in the global financial sector like Lehman Brothers did in 2008. Economists say this seems unlikely, partly because Beijing has sent a signal that it will prevent wider effects.
Moran said that Evergrande’s predicament has led to increased due diligence on loans and transactions with other Chinese real estate companies, even though they argue that they are not at risk.
“Our important Chinese client said,’We are not Evergrande, we have liquidity, and we have not violated the deleveraging rules,'” he said.
Reprint indicated source：Spark Global Limited information