China Evergrande Group announced that it had no money to repay its debts, and founder Xu Jiayin was interviewed by officials. (Reuters)
[Financial Channel/Comprehensive Report]After struggling for half a year, China Evergrande Group announced on the evening of the 3rd that it was unable to fulfill a debt of US$260 million (about NT$7.3 billion), opening the door to default, and Zhongnanhai jumped. The Guangdong Provincial Government took the lead in interviewing Xu Jiayin to understand the situation, and then the People’s Bank of China, China Banking Regulatory Commission, and China Securities Regulatory Commission issued a statement supporting the Guangdong Provincial Government to send personnel to Evergrande to find out. According to the financial report, Evergrande’s on-balance sheet debt is about RMB 2 trillion (approximately NT$8.7 trillion), but off-balance sheet debt is still a mystery. It is estimated that the total debt has reached the peak of its peak. It remains to be seen whether it is on the way to reorganization.
China Media reported that Evergrande’s USD 19.236 billion (approximately NT$538.6 billion) outstanding US dollar debt is just the tip of the iceberg of Evergrande’s total liabilities of RMB 2 trillion (approximately NT$8.7 trillion). Because real estate companies have always had serious off-balance sheet liabilities, Evergrande has achieved the ultimate. How much is Evergrande’s off-balance sheet liabilities, whether it exceeds the current Evergrande’s net assets of more than 300 billion yuan (about 1.3 trillion yuan), or even more, So far, there is a lot of fog.
Therefore, when Evergrande announced that it could not fulfill a debt of US$260 million (about NT$7.3 billion), it undoubtedly opened the door to debt default. After the Guangdong Provincial People’s Government interviewed Xu Jiayin, it immediately announced that it would send a working group to Evergrande. In less than half an hour, the central bank, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the Ministry of Housing and Urban-Rural Development all expressed their positions in support of the Guangdong Provincial Government.
According to Chinese media, it has been almost half a year since Evergrande’s liquidity crisis broke out, and the “condition” has not improved. For the US$19 billion dollar debt holders, the result of Evergrande’s official announcement that they have no money to repay the debt is not a shock. Moreover, the market price of Evergrande’s US dollar bonds has already fallen to two or three folds of the face value, which is a junk bond grade, showing that the market has been prepared for a long time.
As for whether Evergrande will eventually go on the road to reorganization, it can only wait for the Chinese government to decide.
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