China Evergrande slid into something of a limbo on Friday as time ticked by on an interest payment deadline as global markets were on the lookout for signs of default, leaving investors on edge over the fate of the real estate giant. besieged.
The company has run out of cash to finance its $ 305 billion in debt and markets are concerned that a collapse could pose systemic risks to China’s financial system and have repercussions around the world.
Last week, Evergrande appointed financial advisers and warned of default and world markets fell sharply on Monday, though they have since stabilized. In their offices, irate small investors have protested to try to recoup the life savings invested in their property and wealth management products.
Evergrande promised to prioritize them and also settled a coupon payment on a domestic bond this week. But it hasn’t said anything about a foreign interest payment of $ 83.5 million due Thursday or a payment of $ 47.5 million due next week.
Bondholders are losing hope and are beginning to think that it could be a month or so before things clear up.
As night fell in New York, there were no announcements about the payment. A company spokesperson did not respond to requests for comment.
Failure to pay within 30 days of the deadlines would put the bonds in default and fuel concerns about a disorderly sell-off dragging down China’s vast real estate sector.
“Current market prices estimate that investors in Evergrande dollar bonds are likely to recover very little,” said Jennifer James, portfolio manager and lead emerging markets analyst at Janus Henderson Investors.
“The most likely outcome is that the company engages with the creditors to reach a restructuring agreement,” he said.
As “the way China manages Evergrande and others, it could have consequences. If mismanaged, the loss of confidence could have contagion effects to other financial markets.”
Bondholders should know shortly after 0100 GMT if any payments have come in the next day, a Hong Kong trader said.
On Thursday, Bloomberg Law reported that Chinese regulators had asked Evergrande to avoid a short-term default, citing anonymous people familiar with the matter.
However, the Wall Street Journal said separately, citing unidentified officials, that authorities had asked local governments to prepare for the fall of Evergrande.
Global markets have started a recovery after a strong selloff, operating on the grounds that Evergrande’s troubles can be contained.
Evergrande’s assets are trading at difficulty levels, with the stock price dropping more than 80% this year and dollar bonds with imminent payments due trading around 30 cents on the dollar.