Jakarta, CNBC Indonesia – The second property giant in China, namely China Evergrande Group, which previously had problems from default (default) of its corporate bonds, reportedly managed to make interest payments for at least two of its corporate bonds last Wednesday (10/11/2021).
This was conveyed by an Evergrande corporate bondholder, who signaled that the company had again succeeded in avoiding default.
Reported ReutersLast Friday (12/11/2021), a spokesman for Clearstream, a post-trading service provider owned by Deutsche Börse AG, said that customers of this international clearing company have already received interest payments due on bonds issued by Evergrande.
Evergrande owes investors nearly US$ 150 million in interest payments or equivalent to Rp 2.15 trillion (exchange rate of Rp 14,300/US$) on the three bonds, with the grace period for those payments due to expire last Wednesday.
If the deadline is passed it will trigger default which could spread to other Chinese property companies and worse could affect the Chinese economy.
With debt reaching around US$ 300 billion or equivalent to Rp 4,290 trillion, the company’s inability to pay its debts has the potential to hurt banks, property developers, and even home buyers in China.
Instead, the company managed to get from one deadline to the next, being able to meet its last-minute obligations.
Unfortunately, often this information comes out without explaining how they were able to do it or even not disclosing at all disclosure of information that they have made payments, or where the funds come from.
It was previously known that the company had tried to sell some of its ‘royal’ business assets to raise enough money.
In October, when Evergrande abandoned plans to sell a $2.6 billion stake in the property services company to other developers, Evergrande warned in a filing with the securities authorities in Hong Kong that there was “no guarantee” that they would can meet financial obligations or negotiate loan tenor extensions with creditors.
While Evergrande has managed to avoid default so far, the property crisis has begun to weigh on other Chinese developers, with one after another property companies starting to miss payments or default on their debts altogether.
The Chinese government has also tightened controls on lending and many investors are starting to leave the sector.
At least six Chinese property developers have defaulted on foreign currency bonds in recent weeks.
These conditions rattled domestic financial markets and increased borrowing costs for all Chinese companies. Chinese property prices slow and fewer people are buying apartments, worsening prospects real estate of China.
Analysis Reuters see, Evergrande’s challenges can also spread beyond China, as it can fluctuate through global financial markets.
On Monday last week, the central bank of the United States (US), the Federal Reserve (The Fed), said that problems in China’s property sector could threaten the country of Uncle Sam.
Beijing’s regulatory focus on corporate debt, the Fed said, “has the potential to put pressure on some heavily indebted companies, especially in the financial sector. real estate, as exemplified by recent concerns over China Evergrande Group.”
These pressures, in turn, can extend to the broader economy.
“Given the size of China’s economy and financial system and its broad trading relationship with the rest of the world, financial pressures in China could weigh on global financial markets by lowering risk sentiment, posing risks to global economic growth, and affecting the US,” the Fed said.
At least six Chinese property developers have defaulted on foreign bonds in recent weeks, rattling domestic financial markets and increasing borrowing costs for all Chinese companies.
CNBC INDONESIA RESEARCH TEAM
(chd / chd)
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