Beijing, China—China’s troubled property giant Evergrande has made a key offshore interest payment a day ahead of a weekend deadline, state media said Friday, averting a default and buying the embattled company a reprieve as it struggles under a mountain of debt.
The crisis at one of the nation’s biggest property developers has hammered investor sentiment, rattled the key real estate market and fueled fears of a spillover into the wider economy.
Evergrande is reported to have missed at least $150 million in offshore bond payments and while it had a 30-day grace period on some of them, there had been a general expectation it would not be able to meet its obligations.
However, on Friday the state-backed Securities Times said the developer had wired $83.5 million for an overseas payment first due on September 23, citing “relevant channels.” It said bondholders would receive the payout before Saturday—the end of the grace period.
The news comes just a day after the company said the planned sale of its property services arm for $2.58 billion had fallen through and warned it could not guarantee it would meet its debt obligations, putting it on course for a default and possible restructuring.
Fears about an Evergrande failure have rattled markets, and shares in the firm have collapsed more than 80 percent since the start of the year. It rose more than four percent Friday in Hong Kong.
But observers warned the firm was still teetering, with several other dollar bond payments still to navigate before the end of the year.
“They may be able to pay this interest, and maybe they can pay another interest—basically they have an interest payment every two weeks or so-–but at some point… there’s going to be an amount of principal maturing, and that one’s multibillion,” Chen Long, partner at research firm Plenum, told AFP.
“If you look at the fundamentals of the company, that hasn’t changed.”
Beijing began last year clamping down on the country’s colossal property sector—estimates say it accounts for a quarter of the economy—in a bid to rein in excessive debt, with measures to restrict borrowing cutting off companies’ ability to complete projects. AFP
While Evergrande is the standout, the moves have hit several other developers, with several including Sinic and Fantasia among those failing to make debt payments.
Still, Chinese leaders insist any fallout can be contained, but the crisis has prompted rare public anger and protests from anxious homebuyers, suppliers and investors.