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China’s Evergrande debt situation escalates

China Evergrande Group (3333.HK) shares fell more than 10% to HK$2.28 on the Hong Kong Stock Exchange on Monday. This week, the focus is, particularly on Evergrande’s bond interest payment. If Evergrande is unable to pay, it would result in a bond default. Evergrande has accumulated about $305 billion in liabilities.

The Evergrande risk has spread to other real estate developers. Sinic Holdings (2103.HK) lost a whopping 87% before trading was suspended.

Shares of asset management unit Evergrande Property Services Group (6666.HK) fell 11.30% to HK$4.08.

Film streaming company HengTen Networks Group Ltd (0136.HK), majority-owned by Evergrande, fell 9.48% to HK$2.10.

Especially important for Evergrande will be the payment of bond interest on Thursday. The company must pay more than $80 million on the March 2022 bonds. Another payment of $47.5 million is due at the end of September.

However, it is unlikely that the company will receive direct government assistance. Government officials have already announced that Evergrande should not rely on state aid. Authorities are signaling to major creditors to extend interest payments while interest rates remain unchanged.

A major lender has already filed a bad debt claim for its loans to China Evergrande. While some creditors plan to extend the payment deadline.

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