China Evergrande inches closer to default as interest deadline quietly expires
Global News
A Thursday deadline for paying $83.5 million in bond interest passed without remark from Evergrande or any sign of bondholders being paid.
China Evergrande inched closer on Friday to the potential default that investors fear as an interest deadline expired without any announcement from the property giant whose mountain of debt has spooked world markets.
The company owes $305 billion, has run short of cash and investors are worried a collapse could pose systemic risks to China’s financial system and reverberate around the world.
A deadline for paying $83.5 million in bond interest passed without remark from Evergrande or any sign of bondholders being paid. The firm is now in uncharted waters and enters a 30-day grace period. It will default if that passes without payment.
“These are periods of eerie silence as no-one wants to take massive risks at this stage,” said Howe Chung Wan, head of Asia fixed income at Principal Global Investors in Singapore.
“There’s no precedent to this at the size of Evergrande … we have to see in the next ten days or so, before China goes into holiday, how this is going to play out.”
China’s central bank again injected cash into the banking system on Friday, seen as a signal of support for markets. But authorities have been silent on Evergrande’s predicament and China’s state media has offered no clues on a rescue package.
Evergrande appointed financial advisers and warned of default last week, and world markets fell heavily on Monday amid fears of contagion, though they have since stabilized.
The conundrum for policymakers is how fiercely they can impose financial discipline without fueling social unrest, since an ugly collapse at Evergrande could crush a property market which accounts for 40% of Chinese household wealth.
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