Evergrande’s over $ 300 billion liabilities caused debt market risk premiums to hit an all-time high, while numbers from the People’s Bank of China show a slowdown in lending in the financial sector.
A bankruptcy out of control. The crisis at Evergrande Group and other home builders pushed the debt market risk premiums of weaker Chinese firms to an all-time high on Wednesday, October 13, while prompting a new round of credit rating downgrades. .
The real estate giant accumulates debts of 300,000 million dollars in liabilities and currently manages 1,300 real estate projects in some 280 cities. This week he missed a third date of interest payments on his international bonds. Now more companies have warned they could default.
S&P Global, the rating agency, downgraded two other large firms: Greenland Holdings and E-House, which follow in Evergrande’s footsteps and reflect the financial crisis in the real estate sector.
“We see the risk that a disorderly correction in the housing market could cause sharp price declines, affecting homeowners’ personal wealth,” said Kim Eng Tan, a credit analyst at S&P Ratings.
Eng Tan added that “such an event could also contribute to large-scale losses by investors in wealth management products and by contractors and service companies that support developers.”
The spread on the high-yield index or companies rated ‘junk’, a list featuring Evergrande, reached a new all-time high of 2,337 basis points on Wednesday. That brought the yield to 24%, a figure that reflects how much businesses would have to pay to borrow.
In August, Evergrande raised $ 8 billion by selling part of its shares in electric vehicle unit HengTen, as well as a regional bank that it sold for $ 1.55 billion and real estate company Hangzhou. Nearby sources affirm that the real estate company will sell other businesses related to tourism and water to try to pay off its debt.
Evergrande is considered the tip of the iceberg of the crisis in the Chinese real estate sector, which is over-indebted and which accounts for about a quarter of the Chinese economy.
A report by the International Monetary Fund (IMF) assured that the Chinese authorities “have the tools to intervene” if the Evergrande crisis worsens.
Our assessment is that the Chinese authorities have fiscal power and space, as well as legal and institutional means to tackle the problem, “said Tobias Adrian, the director of the IMF’s Capital and Monetary Markets Department.
With AP and EFE