The world’s most indebted real estate developer, China Evergrande Group, has avoided default — at least for now — after making a key interest payment at the eleventh hour. The Chinese property developer’s cash crisis has sparked fears about global financial fallout from its collapse.
State-backed newspaper Securities Times reported Friday that Evergrande had wired a $83.5 million payment to bondholders, avoiding one of the largest defaults in history.
The news was received with cautious optimism by the market, with Evergrande’s longer-term prospects unclear. The company is still staggering under $300 billion in debt, about 2% of China’s gross domestic product. Investors had feared Evergrande’s collapse could snowball across the global financial sector like Lehman Brothers did in 2008.
“While it is obviously a positive step, people want to see a viable plan for the next payment,” said Scott Mollen, a partner at a New York-based law firm representing some Chinese real estate companies. “The fundamental issues remain and need to be addressed.”
Evergrande, founded in 1996, rode its way to the top of China’s housing boom while building up a mountain of debt. The Securities Times report on Friday didn’t say how Evergrande financed the interest payment or if there was government intervention. Evergrande did not respond to requests for comment.