Chinese builder in debt jam says it will make bond payment

Chinese builder in debt jam says it will make bond payment
A Chinese real estate developer that is struggling to avoid defaulting on billions of dollars of debt says it will make an interest payment due this week

A 中国語 real estate developer that is struggling to avoid defaulting on billions of dollars of debt reassured jittery global markets at least briefly Wednesday by announcing it will make an interest payment due this week.

The Chinese government, その間, kept investors guessing about whether it might intervene.

Evergrande Group’s struggle to comply with financial limits regulators imposed to curb rising debt levels has prompted fears a default might cause global shockwaves. Economists say banks and bondholders are likely to lose money if Evergrande restructures its $310 billion debt but 北京 has the resources to prevent a Chinese credit crunch.

The government wants to avoid appearing to arrange a bailout as it tries to force private companies to cut their debt loads but probably will try to protect families that paid for apartments that are yet to be built, エコノミストは言う. That would cause bigger losses for other creditors.

恒大, one of China’s biggest private sector conglomerates, said it will make a payment due Thursday on a 4 10億元 ($620 百万) bond denominated in Chinese yuan.

A company statement said details were “settled in negotiations outside the market” but gave no indication whether that meant any change in the payment. The bond has a 5.8% interest rate, which would make the normal amount due 232 百万元 ($36 百万) for one year.

Evergrande gave no information on possible future payments including a bond denominated in U.S. dollars in March.

“The silence from Beijing is adding to market nervousness,” Venkateswaran Lavanya of Mizuho Bank said in a report.

それでも, the Shanghai Composite index bounced back from early losses on Wednesday, gaining 0.4%. 香港 s market, which has been jolted by Evergrande’s predicament, was closed for a holiday.

The company’s billionaire founder, Xu Jiayin, expressed confidence in a letter to employees this week that the company will quickly resolve its debt problems.

Regulators tightened limits on borrowing by China’s real estate industry last year to rein in surging debt the ruling 共産党 worries might threaten economic growth. Evergrande has sold billions of dollars of assets to pay down debt and get under the official limits.

The ruling party has declared reducing debt and financial risks a priority since 2018. But total corporate, government and household borrowing rose to nearly 300% of economic output last year from 270% に 2018, unusually high for a middle-income country.

As of June 30, Evergrande reported 2 兆元 ($310 十億) of outstanding debts to bondholders, banks, construction contractors and other creditors.

Of that debt, 240 10億元 ($37.3 十億) was due within a year, nearly triple Evergrande’s 86.8 10億元 ($13.5 十億) in cash holdings, according to a company financial report.

Beijing allowed the first corporate bond default of the communist era in 2014 as part of efforts to force borrowers and lenders to be more disciplined. Defaults by private sector borrowers have gradually been allowed to increase, but the government has arranged bailouts for state-owned companies.

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