World holds its breath as Evergrande is on the brink of collapse
World holds its breath as Chinese property giant Evergrande is on the brink of collapse
Financial institutions and developers around the world were on alert after Evergrande warned it would be unable to repay its debts.
The Chinese real estate giant is on the brink of collapse as Asian and Western banks brace for the biggest default since Lehman Brothers went bankrupt in 2008.
Evergrande, which is in debt of more than £300 billion, has struggled to pay off debt since September. Much of the money is owed to companies outside of China.
Chinese real estate giant Evergrande is on the brink of collapse as Asian and Western banks brace for the biggest default since Lehman Brothers went bankrupt in 2008
A spokesman said after the markets closed on Friday: “Given the current liquidity status, there is no guarantee that the group will have sufficient funds to continue to meet its financial obligations.”
When trading resumed yesterday, shares plunged to all-time lows, closing nearly 20 percent. They have lost 88 percent of their value since the beginning of the year.
The statement prompted Chinese officials to intervene and send a team to the company’s offices, while founder Xu Jiayin has been called to join the Communist Party.
Analysts think the group is getting closer to default.
Conita Hung, investment director at Tiger Faith Asset Management, said the latest statement suggested the company would “surrender and need help.” “This is a very bad signal,” she added.
Lenders with direct exposure to Evergrande include UBS and Bluebay Asset Management of Royal Bank of Canada. Money manager Blackrock is also to blame.
Asia-focused HSBC and Standard Chartered have no direct debt from Evergrande, but could still face difficulties given their massive presence in the Chinese and Hong Kong real estate market.
Karl Clowry of law firm Addleshaw Goddard said: “Until there is a further announcement, everyone is waiting to see if this will be the first real trigger event.”