Daily Column – 24th September 2021

Evergrande group which is a China-based real estate conglomerate is faced with a deadline of 23rd September 2021 i.e. today for making a bond interest payment of $83.5 million. Investors are afraid that the company will not be able to make the payment and is going to deposit on the company’s debt and there is also going to be a ripple effect on the world economy due to this.

Evergrande which is China’s 2nd largest real estate developer has borrowed aggressively in the last 2 decades as the company helped in fueling the construction boom of the country. Along with the prolific spending, the crackdown of the government on financing debt pushed Evergrande towards a cash crunch. As per June, 88 billion dollars in the outstanding debt along with 42 per cent due in a year. Due to the scarcity of cash the company has to pay its suppliers by giving them unfinished apartments over the summer. The stock price of the company has come down to 80% this year so far,  and as of today morning, it is trading at 0.40$.

Some people have likened this crisis to Lehman Brothers Collapse in a Chinese version. It is going to be the largest debt default in history by a company in Asia.

If the payment gets missed, the company will have a grace period of thirty days to meet the obligation.

As per the reports of the Boomerang Law, the company has been asked by the Chinese regulators to avoid near-time default on the dollar bonds of the company on Thursday which is also the day in which the troubled company is due for making a much-awaited payment of interest on the company’s offshore debt.

In a meeting held recently with the executives of Evergrande, the regulators have said that to avoid any default Evergrande should proactively have a talk with the beholders, but no specific guidance was given about it, as per the reports.

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