Deadline for Evergrande to make coupon payments
Scenery Journey Ltd., a unit of Chinese property development company Evergrande Group, faces a hard deadline to pay $82.5 million in coupons today.
Evergrande has been threatening to default on its $300 billion debt for several months thanks to a liquidity crisis brought on by a regulatory crackdown on real estate investing due to the sector’s massive indebtedness. The company has managed to scrape together enough funds to meet successive interest payments, but it is quickly running out of resources.
In response, Chinese authorities have urged Evergrande’s billionaire founder, Hui Ka Yun, to step in and use his own personal wealth to stabilize the situation. This push carries substantial weight, as the Chinese government has in recent years demonstrated its ability and willingness to punish even the super-wealthy with impunity.
The crisis that began with Evergrande has already begun to spread—most notably to Kaisa Group, another collapsing homebuilder—and will accelerate if Hui does not step in. He likely will: the government prefers not to bail out Evergrande themselves and can pressure him into doing so. Though a short-term solution, this may buy sufficient time for Evergrande to resolve or ameliorate its debt problems sufficiently to avoid further collapse.
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