Last-minute Debt Deal Keeps Evergrande Afloat, but Crisis Is Far From Over

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BEIJING, CHINA - SEPTEMBER 22: A man walks past a bear-like sculpture at Evergrande City Plaza shopping center on September 22, 2021 in Beijing, China. Evergrande, China's largest property developer, is facing a liquidity crisis with total debts of around $300 billion. The problems faced by the company could impact China’s economy, and the global economy at large. (Image: Andrea Verdelli/Getty Images)

The Evergrande Group has struck a last minute deal to avoid defaulting on a bond payment worth an estimated $35.9 million that is due this Thursday Sept. 23.

“In a statement filed with the Shenzhen Stock Exchange in mainland China, Hengda Real Estate Group said it had reached an agreement with holders of the onshore bond over the repayment,” the BBC reported.

No details were revealed concerning how the deal was structured and whether or not interest would be paid only that the bond “has already been resolved through private negotiations.”

The announcement offered some relief for concerned investors. The China Evergrande Group’s stock rose by  47.5 percent following news of the deal after shedding nearly 90 percent of its value in the past 14-months. 

The temporary reprieve is just that, temporary. The developer, with reported liabilities in excess of $300 billion dollars is also due to make a $83.5 million dollar interest payment on an overseas bond this Thursday as well. No announcement concerning how China’s second largest property developer by sales intends on satisfying the payment has been made.

Under agreements with investors, the Evergrande Group has a 30-day grace period before missed payments on the offshore bond would be considered in default. It’s critical time required for the developer to either find cash to satisfy the debt or to negotiate new terms.

The company’s solvency problems are sending shock waves across global markets over concerns that it is close to collapse. 

The company has started to repay investors in its wealth management products (WMPs) with property as it struggles to find enough cash to meet its liabilities.

On Monday, Sept. 20 Evergrande reportedly missed interest payments to at least two of its biggest lenders. 

Earlier in September the Evergrande Group had trading of its bonds temporarily suspended by China’s stock exchanges after “abnormal fluctuations” were discovered in the price of the company’s corporate bonds. 

Recently, protests erupted across China at numerous properties owned and operated by the indebted real estate company with home buyers, retail investors and even Evergrande’s own employees speaking out against how the struggling company is managing their WMPs. 

The company, which employs upwards of 200,000 people and claims to indirectly generate 3.8 million jobs in China, has a presence in more than 280 cities throughout China. Its bankruptcy would have devastating effects on the Chinese economy and the wider global market.