China’s second largest real estate company Hengda (恒大, Evergrande) is in the spotlight again in the liquidity crisis.
He said that Hengda could not repay its debts due to lack of funds, and in effect predicted default (default). There is.
Hengda made a surprise announcement of the default crisis situation through an ‘owl announcement’ posted on the Hong Kong Stock Exchange on the midnight of Friday, the 3rd.
Hengda said it was asked to meet its obligation to guarantee a debt of $260 million, but repayment could be difficult.
According to the announcement, the debt could be related to dollar bonds issued by Jumbo Fortune of Hong Kong, a Hengda affiliate.
Jhuxiang failed to repay the $260 million bond that matured in October, and Hengda took a guarantee on the bond.
In October, foreign media reported that Hengda had extended the repayment period by three months until January next year through individual negotiations with the creditors.
If the debt Hungda mentioned in this disclosure is correct, it appears that the creditors concerned immediately demanded repayment of the debt.
If Hungda fails to actually repay this debt, an official default is declared, which in turn leads to a series of massive defaults.
Currently, the size of Hengda’s dollar bonds remaining to maturity is 19.236 billion dollars (about 22.7 trillion won).
When the dollar bond defaults begin, Hengda will no longer be able to control the liquidity crisis on its own.
The dollar bond issue is just the ‘tip of the iceberg’ in the whole Hengda crisis.
Still, the dollar bond issue is particularly highlighted in the Hengda liquidity crisis because the market is the most transparent about trends on this issue.
As of the end of June, Hengda’s total debt stood at 1.96 trillion yuan (about 365 trillion won).
Hengda’s debt spans from domestic banks and other financial institutions, yuan-denominated bonds, shadow financial instruments, and dollar bonds.
In addition, there are many people who have taken money from Hengda, including large contractors, material suppliers, and farmers at construction sites participating in the Hengda construction project.
The Chinese authorities also moved tense last night.
The Guangdong Provincial Government, which was in charge of the primary management of the Hengda incident, urgently summoned Chairman Xu Jain the day before and interviewed him.
There is still the possibility that Hengda will avoid default dramatically as it successfully sells a large asset with the support of the authorities.
Right now, if Hengda fails to repay the interest on dollar bonds of $82.49 million (about 97.6 billion won) by the 6th, it will officially default.
In addition, on the 28th of this month, interest on dollar bonds of 234 million dollars (about 287.5 billion won), and interest on a total of seven dollar bonds in January of next year, 415 million dollars (about 490.9 billion won) ) must be paid separately.
If Hengda’s default is formalized, court bankruptcy proceedings may begin with a creditor’s application to forcibly repossess its assets.
In China, bankruptcy is broadly divided into bankruptcy liquidation procedures, in which the corporation is eliminated after disposing of all remaining assets to creditors, and bankruptcy restructuring through debt adjustment and additional investment. will step on it.
Industry observers predict that the bankruptcy restructuring of Hainan Airlines (HNA) Group, which was split into three companies through bankruptcy, will set a precedent for Hengda.
Chinese authorities are also suggesting that they are preparing for a hard landing in Hengda.
China’s key financial authorities, the People’s Bank of China, the Banking Regulatory Commission, and the Securities Regulatory Commission, in a statement released the night before as if prepared in advance, defined the Hengda incident as an ‘individual incident’ and did not pose a threat to China’s economic stability. A message was issued to the effect that no
The central bank, the People’s Bank of China, said in a late-night statement that “short-term risks to real estate companies will not affect the normal lending function of the market in the mid- to long-term”.
The Banking Regulatory Commission of China also emphasized that financial sector debt accounts for only a third of Hengda’s total debt and is structurally dispersed, stressing that it will not negatively affect the normal operation of the financial sector.
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