According to insiders, the ailing Chinese real estate company Evergrande has paid interest payments on a yuan bond. The subsidiary Hengda Real Estate Group has transferred funds to meet a payment due this Tuesday of the equivalent of 19 million dollars, said four people familiar with the matter to the Reuters news agency.
However, the group continues to fear investors in dollar bonds of the group. According to one of the insiders, with his limited resources, he must primarily keep an eye on the domestic market. Because much more is at stake for China’s financial system.
Evergrande sits on a mountain of debt equivalent to more than $ 300 billion and has already missed several deadlines for interest payments due to bondholders. Given the size of the debt, there are concerns that a collapse of the company could spark a conflagration in China’s real estate sector.
A grace period of 30 days will soon expire for a bond interest payment that became due in September. Evergrande had already let a third round of due coupon payments elapse last week.
The Evergrande crisis has sparked fears of possible spillover effects on the financial markets in Europe. In the back of their minds for many investors is the experience of the financial crisis of 2008, when the collapse of the investment bank Lehman Brothers tore down the financial markets around the world.
France’s central bank chief Francois Villeroy de Galhau tried on Tuesday to allay such worries. History is not about to repeat itself, said Villeroy de Galhau when asked. “I think Evergrande is primarily a Chinese problem,” said the councilor of the European Central Bank (ECB). “There will be no contagion outside of China.” Evergrande is a serious problem for Chinese authorities.