China's second-largest real estate developer, the Evergrande Group, a company that faces over $300 billion in liabilities, said in a Friday filing to the Hong Kong stock exchange that it must pay its creditors $260 million despite struggling to find money for its recent payments.
"In light of the current liquidity status...there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations," the company said in its statement reported by Reuters.
Reuters wrote that this news set off a chain of meetings with government officials, starting with a Friday appointment in Evergrande's home state, the Guangdong province, where the company's Chairman Hui Ka Yan met with officials. After this meeting, the government agreed to send a "working group" that would "oversee risk management, strengthen internal controls and maintain normal operations," Reuters reported.
From here, China's central bank, the People's Bank of China, got involved, reassuring that any potential effects of an Evergrande collapse on the market could be contained. However, it would not guarantee that this mitigation would be done through a bailout.
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Global Times(CCP mouthpiece)
Chinese analysts on Sunday refuted some foreign media reports saying that the Evergrande Group's latest debt warnings and the country's move to rein in the real estate industry will greatly decelerate China's GDP growth, noting that the country is already acting to prevent a domino effect and it has more tools than some Western countries to deal with the issue of a single developer.
Over the weekend, Chinese regulators voiced support for real estate firms' reasonable debt issuance and financing, a sign that the months-long tight controls on real estate financing aiming to crack down on speculators may be temporarily relaxed, while also proving the central government's ability to prevent a spillover of Evergrande's situation on China's financial market, analysts said.
The remarks came as the Shenzhen-based property developer warned on Friday that it might fail to meet its financial obligations. Not long after the warning, the provincial government of South China's Guangdong summoned the heavily indebted Evergrande Group for talks and agreed to send a working group to the company to guide it in strengthening internal controls and management, and also in maintaining normal operations.
Later, three major Chinese financial regulators, in rare simultaneous statements, moved to reassure the markets that the Evergrande issue is an individual case and should not be a concern for the country's capital market or housing market.
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China Evergrande Group’s long-awaited debt restructuring may finally be at hand, posing a fresh test for Xi Jinping’s government as it tries to rein in the country’s financial excesses without derailing economic growth.
The embattled developer said in an exchange filinglate Friday that it plans to “actively engage” with offshore creditors on a restructuring plan, offering its most explicit acknowledgment yet that its $300 billion of overseas and local liabilities have become unsustainable
The company’s next test comes Monday. That’s when a 30-day grace period ends on two dollar bond interest payments that were initially due Nov. 6: a $41.9 million coupon for a note maturing in 2022 and $40.6 million of interest on a security due the following year. Both bonds were issued by unit Scenery Journey Ltd.
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