Evergrande meets the deadline for $119 million in interest payments
Chinese real estate company Evergrande Group avoided defaulting on an $83.5 million interest payment due today.
Today was the end of a 30-day grace period to make the payment after Evergrande failed to meet the initial deadline. The company still faces trouble as more payments are coming due and a recent sale deal meant to raise money fell through.
The combination of a regulatory crackdown on speculative investing and a slowing economy has reduced sales and revenues of massive development companies. This forced a liquidity crisis upon Evergrande, which has resulted in lost income, a halt to construction projects and the likelihood of a formal default. This could trigger a wider financial crisis as investors shy away from Chinese markets and a large percentage of Chinese wealth is tied to property
Do not expect Beijing to bail out Evergrande. However, state owned enterprises and banks will likely step in behind the scenes to negotiate deals to provide Evergrande with money and avoid defaults and social unrest short-term. Medium-term, expect a government monitored restructuring to cover a majority of the debt. Foreign investors will most likely lose out, which will hurt China long-term as they shy away from further ventures.
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