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China Evergrande is not ‘too big to fail’, says Global Times editor

China Evergrande is not ‘too big to fail’, says Global Times editor

The China Evergrande Center building sign is seen in Hong Kong, China. August 25, 2021. REUTERS / Tyrone Siu / File Photo

HONG KONG, September 17 (Reuters) – The editor-in-chief of the state-sponsored Chinese newspaper Global Times warned debt-ridden real estate giant Evergrande Group (3333.HK) not to invest in a state rescue on the assumption that it is “too big for to fail”.

It was the first comment to appear in state-sponsored media that cast doubt on a government bailout for the country’s No. 2 property developer, whose shares fell Friday for the fifth day in a row amid concerns it is heading for default.

Evergrande is struggling to raise funds to pay its many lenders and suppliers and investors, with regulators warning that $ 305 billion in liabilities could trigger broader risks to the country’s financial system if left unstabilized. Read more

Global Times editor-in-chief Hu Xijin said on his WeChat account on social media on Thursday that Evergrande should address the market for salvation, not the government.

He said Evergrande’s potential bankruptcy was unlikely to trigger a systemic economic storm like the Lehman Brothers’ collapse because it was a real estate business, not a bank, and property repayment rates in China were very high.

The Global Times is a nationalist tabloid published by the Communist Party’s People’s Daily. Its views do not necessarily reflect the official thinking of politicians.

Politicians are telling Evergrande’s major lenders to extend interest payments or loans, and market watchers increasingly think a direct rescue from the government is unlikely.

A group of Evergrande’s offshore bondholders have chosen investment bank Moelis & Co and law firm Kirkland & Ellis as advisers on a potential restructuring of a tranche of bonds focusing on about $ 20 billion in outstanding dollar bonds in the event of default, Reuters sources said. Read more

Evergrande is due to pay interest of $ 83.5 million on September 23 for its March 2022 bond. It has another interest rate of $ 47.5 million to be paid on September 29 for the March 2024 banknotes. The bonds would default, if Evergrande fails to pay the interest within 30 days.

Evergrande’s devastation – which has more than 1,300 real estate projects in more than 280 cities – is dampening the yuan and confidence in Chinese assets more widely.

Evergrande shares fell another 13% to $ 2.28 on Friday, the lowest level since October 2011. The offshore bond in October 2023 fell 10% to 16,125 cents

China Minsheng Banking Corp., one of Evergrande’s largest lenders, fell 4.6% to a record low of $ 2.80.

Reporting by Clare Jim; Edited by Stephen Coates

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