Chinese property giant Evergrande Group missed the deadline to pay its $83.5 million in interest on a $2 billion offshore bond to global investors, the Wall Street Journal reported on Friday.
The company, which also has a $47.5 million-bond interest payment next week, was due to make the first interest payment by September 23. The disbursement was seen as a major test of the real estate developer’s chance to avoid a default. However, the report noted that Evergrande, a company with an outstanding debt of more than $300 billion, could settle the interest within 30 days of the scheduled payment before bondholders can call a default.
Over the last few weeks, the company, led by founder Xu Jiayin, whose rapid, debt-fueled expansion business model made him one of China’s wealthiest man, warned investors of cash flow issues. Evergrande said that it could default if it is unable to raise cash quickly.
That warning was underscored following a stock exchange filing that said the company was having a difficult time finding buyers for some of its assets.
Evergrande owns more than 1,300 real estate projects in more than 280 Chinese cities. It owes money to more than 170 Chinese banks and 121 other financial firms.
Previously, it was reported that China was asking state-owned businesses and local authorities to prepare for Evergrande’s collapse. Bloomberg notes that the optimistic take among global investors is that Evergrande’s is a “controlled explosion” rather than a “Lehman moment”, meaning the Chinese government will try to assist the company through guidance with debt restructuring or bankruptcy. Meanwhile, the European Central Bank noted that its direct exposure to the world’s most indebted real estate firm was limited.
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