The Evergrande Group of China managed to again stave off a destabilizing default through a last gasp bond payment. The reprieve doesn’t seem sufficient for the cash-strapped Chinese developer from avoiding future stress in the country’s overall property sector.
International clearing firm, Clearstream’s customers received long-due interest payments for the $3 bonds that were handed out by Evergrande. This was disclosed by a spokesperson of Clearstream.
Evergrande continues to be the most indebted property developer in the world as it struggles with liabilities of over $500B. $19B of such debts are in dollar bonds.
Evergrande Managed To Stave Of Default At The Last Minute
The latest round of payments by Evergrande comes right at the end of the grace period of 30 days that ended on Wednesday. This is the 3rd time that Evergrande has come dangerously close to defaulting and had paid up at the last minute.
The company bond had over $148M in dues. Failure by Evergrande to pay up would have meant a formal declaration of default by Evergrande. It could have led to cascading cross-defaults by various Dollar bonds of Evergrande. This would have aggravated a looming debt crisis over the 2-largest economy in the world.
For now, the company has managed to avoid imminent disaster. But the woes at the $5T property sector in the country have shown little signs of easing as a huge mountain of debt is due soon.
An insider disclosed that while there have been short-term fixes such as the company payoff, it will be some time before the issue can be sorted out. He said that these were merely the early days of the looming crisis.
Analysts and bankers have said that Beijing has indicated that it stands firm behind policies that are against excessive borrowing by developers even while it tweaks finances to come out of the liquidity crunch in the industry.
The company has another round of coupon payments that adds to over $255M and is due on December 28. It is facing strong payment pressure from creditors and the fund squeeze has affected hundreds of the company’s residential projects.
The US Federal Reserve has warned that the troubled state of the Chinese property sector could affect global finances till there were indications that Beijing would step in with a broad national plan to solve the issue.