China Evergrande not “too big to fail”, says Global Times editor

The China Evergrande Center building sign is visible in Hong Kong, China. August 25, 2021. REUTERS / Tyrone Siu / File Photo

HONG KONG, Sept. 17 (Reuters) – The editor of the Chinese state-backed newspaper Global Times has warned debt-ridden real estate giant Evergrande Group (3333.HK) that he should not bet on a government bailout assuming it is “too big to fail”.

It was the first comment to appear in state-backed media questioning a government bailout for the country’s No.2 property developer, whose shares fell for the fifth day in a row on Friday amid fears that ‘it does not fail.

Evergrande is working to raise funds to pay off its many lenders, suppliers and investors, with regulators warning that its $ 305 billion in liabilities could trigger greater risks to the country’s financial system if not stabilized. Read more

Global Times Editor-in-Chief Hu Xijin said on his WeChat social media account on Thursday that Evergrande should look to the market for salvation, not the government.

He said the potential bankruptcy of Evergrande was unlikely to trigger a systemic financial storm like the collapse of Lehman Brothers because it was a real estate business and not a bank and the down payment ratios on property in China were very high.

Global Times is a nationalist tabloid published by the People’s Daily of the Communist Party. Its opinions do not necessarily reflect the official thinking of policy makers.

Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers increasingly believe a direct government bailout is unlikely.

A group of offshore Evergrande bondholders have selected investment bank Moelis & Co and law firm Kirkland & Ellis as advisers on a possible restructuring of a bond tranche, focusing on around 20 billions of dollars in outstanding dollar bonds in the event of non-payment, sources said. Reuters. Read more

Evergrande is due $ 83.5 million in interest on September 23 for its March 2022 bond. It has another $ 47.5 million interest payment due on September 29 for the March 2024 notes. The bonds would default if Evergrande did not pay the interest within 30 days.

The Evergrande debacle – which has more than 1,300 real estate projects in more than 280 cities – is dragging down the yuan and confidence in Chinese assets in general.

Evergrande shares fell another 13% to HK $ 2.28 on Friday, the lowest level since October 2011. Its October 2023 offshore bond fell 10% to 16.125 cents.

China Minsheng Banking Corp, one of Evergrande’s main lenders, fell 4.6% to a record high of HK $ 2.80.

Reporting by Clare Jim; Editing by Stephen Coates

Our Standards: Thomson Reuters Trust Principles.

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