Concerns continue to mount about a deepening liquidity crisis in China’s real estate sector ahead of the deadline for cash-strapped Evergrande to make an offshore bond coupon payment.
Evergrande, the world’s most indebted developer, has stumbled from maturity to maturity in recent weeks as it grapples with more than US $ 300 billion (A $ 407 billion) in liabilities, including $ 19 billion international market bonds.
The company has not defaulted on any of its offshore debt obligations, but another overdue payment of $ 148 million is due on Wednesday and it has coupon payments totaling more than $ 255 million on its June bonds. 2023 and 2025 on December 28.
Beijing has pushed public companies and state-backed real estate developers to buy some of Evergrande’s assets in an attempt to control the fall.
Despite Evergrande’s stifling debt problems, its electric vehicle unit is pursuing its business plan. The unit is seeking Chinese regulatory approval to sell its first Hengchi 5 sport utility vehicles.
China Evergrande New Energy Vehicle Group Ltd. plans to sell $ 64 million worth of shares to finance the production of new energy cars.
Evergrande shares were little changed from the previous close on Wednesday morning, while the EV unit was up 1.4%.
Concerns about Evergrande’s potential fallout worried China’s real estate industry on Tuesday, slamming real estate company bonds as the crisis could spill over to other markets.
The drop in bond prices came just hours after the US Federal Reserve warned that China’s struggling real estate sector could pose global risks.
China’s real estate problems rocked global markets in September and October.
There was a brief lull in mid-October after Beijing tried to reassure investors that the crisis would not be allowed to get out of hand, but concerns resurfaced.
Founded in Guangzhou in 1996, Evergrande embodied an era of freewheeling borrowing and construction.
But that business model has been scuttled by hundreds of new rules designed to hold back developers and promote affordable housing.
Any prospect of Evergrande’s demise raises questions about the more than 1,300 real estate projects it has in some 280 cities.
The bank’s exposure to developers is also important.