Evergrande Due to Make $83.5 Million Interest Payment
Struggling Chinese lender Evergrande Group is facing interest payments of $83.5m on its bonds today, in addition to a $47.5m payment due later this week.
Evergrande is currently $300bn dollars in debt and threatening to default as it struggles to make interest payments. The real estate and financial services firm’s woes stem from overleveraging their firm, overpromising to consumers and expecting Beijing to bail them out.
The default poses several problems for the Chinese economy as virtually every bank in China holds some of Evergrande’s debt, suggesting a major impending credit crunch. Likewise, those who have purchased the company’s financial products, paid deposits on future homes, or contracted with the company to develop property are all at risk of losing large amounts of money, with the potential of being forced into bankruptcy. Additionally, the firm’s 125,000 employees now face possible unemployment.
If Evergrande fails to pay the interest within 30 days, the bonds will default. Beijing is unlikely to step in now but will likely limit the damage after a default by providing a major injection of cash to financial institutions to enable them to continue meeting their obligations. This action will likely not dispel public anger, however.
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