Evergrande avoids last minute payment default

Released on 22.10. 2021

  • Passers-by pass near the headquarters of the real estate developer Evergrande Group. Photo: Ng Han Guan

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The Chinese real estate company, which is deeply in crisis, can avert bankruptcy for the time being by paying millions. However, this does not mean the all-clear. The mountain of debt is melting slowly.

Beijing (dpa) – According to media reports, the heavily indebted Chinese real estate company Evergrande has given itself some breathing space by paying interest on a bond.

Like the Bloomberg financial agency and the Chinese State newspaper “Securities Times” reported unanimously that Evergrande will sell the 83, 5 million US dollars (around 71, 7 million euros) pay before a deadline on Saturday. Actually the money was on 23. September due, however, there was a grace period of 23 days.

Evergrande is considered the world’s most heavily indebted real estate company with a mountain of debt of around 83 billion dollars. There is an urgent need to raise funds in order to be able to pay banks, suppliers and bondholders on time. The company is so big that some experts fear a “risk of contagion” for China’s economy and beyond. Further interest payments on bonds will be due in the coming weeks and months.

Evergrande initially did not respond to a request on Friday. On the Hong Kong stock exchange, the group’s shares rose by more than four percent after the news about the interest payment. Since the beginning of the year, however, the papers have lost around 71 percent of their value.

Systemically important for China’s economy?

Corporations like Evergrande grew rapidly for a long time because real estate prices in China rose sharply and there was a construction boom. However, it was a thorn in the side of Beijing that the indebtedness of the industry continued to take on new dimensions. Now the government is enforcing strict rules. Beijing has shown the corporations “three red lines”, which made it difficult or impossible to take out new loans Group outgoing risks for the financial system are “controllable”. It is therefore unlikely that the Evergrande crisis will spread to other areas. However, the central bank called on the country’s banks to ensure a stable supply of credit to the country’s real estate companies.

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