Evergrande Group, once the world’s largest real estate empire and now its most indebted company, is teetering. China’s authorities will be acutely aware that if it falls, it could bring down its increasingly vulnerable property market and ignite a financial crisis.
On Tuesday, in a statement to the Hong Kong Stock Exchange, Evergrande detailed the extraordinary pressures mounting on the group, which has about $US89 billion of debt and more than $US300 billion of total liabilities. The fate of Evergrande has massive implications for China’s already shaky property market and the economy-at-large, with property sales accounting for close to 10 per cent of China’s GDP and property constituting the vast bulk of households’ wealth.
“If the group is unable to meet its guarantee obligation or to repay any debt when due or agree with the relevant creditors on extensions of such debts or alternative agreements, it may lead to cross-defaults under the group’s existing financing arrangement and relevant creditors demanding acceleration of repayment.
Evergrande alone has relationships with more than 128 banks and 120 non-banks. With impairments on property loans surging after the authorities tightened credit for property development last year, defaults on its loans could trigger a wave of stress throughout the rest of the sector and its suppliers.
They may have underestimated the vulnerability of the sector – the Evergrande experience says there is significant off-balance-sheet funding via “wealth management” products – but, in any event, the efforts to deflate a leveraged property bubble may have been too successful.
Don't they own aged care facilities that were embroiled in claims of neglect while they raced around in Lambos?
Next GFC on the cards
How does one company even get lent $300 billion?! What does michaeljburry think?
Woah 😮
WA economy * POP *
look out Aussie , NZ and Canadian property too