China Evergrande has slipped into a kind of limbo as time elapsed on an interest payment deadline that global markets are watching for signs of default, leaving investors in suspense over the fate of the beleaguered real estate giant .
The company is strapped for cash to fund its $ 305 billion (AU $ 418 billion) in debt and markets fear a collapse could pose systemic risks to China’s financial system and spill over into the world.
Last week, Evergrande appointed financial advisers and warned of a default, and global markets fell sharply on Monday although they have since stabilized.
In its offices, angry small investors have protested in an attempt to recover life savings buried in its properties and wealth management products.
Evergrande has promised to prioritize them and also resolved a coupon payment on a domestic bond this week.
But he said nothing about an $ 83.5 million offshore interest payment that was due Thursday, or a $ 47.5 million payment due next week.
Bondholders are losing hope and are starting to think it might be a month or so before things get any clearer.
By nightfall in New York City, there had been no announcement regarding the payment. A spokesperson for the company did not respond to requests for comment.
Failure to pay within 30 days of due dates would put the bonds in default and raise concerns about a disorderly liquidation weighing on China’s vast real estate sector.
“Current market prices believe that investors in Evergrande dollar bonds should recover very little,” said Jennifer James, portfolio manager and chief emerging markets analyst at Janus Henderson Investors.
“The most likely outcome is that the company will engage with creditors to reach a restructuring agreement,” she said.
“The way China handles Evergrande, and others, could have consequences. If mismanaged, the loss of confidence could have contagion effects in other financial markets.”
Bloomberg Law reported on Thursday that Chinese regulators had asked Evergrande to avoid a short-term default, citing unnamed people familiar with the matter.
However, the Wall Street Journal separately said, citing unnamed officials, that authorities have asked local governments to prepare for the fall of Evergrande.
Global markets have started to recover from a sell off, trading on the basis that Evergrande’s problems can be contained.
Evergrande’s assets are trading at distressed levels, with the stock price falling more than 80% this year and dollar bonds with looming payments due trading at around 30 cents on the dollar.
Associated Australian Press