Evergrande defaults, bankruptcy proceedings initiated

Photo: ANP

Chinese property developer China Evergrande Group has officially defaulted on interest payments to international investors. The German creditor DMSA (Deutsche MarktScreening Agentur) therefore wants to declare the group bankrupt. DMSA is a German market researcher who owns Evergrande bonds. It also calls on other involved investors to join the application.

Evergrande is struggling with a debt burden of more than 260 billion euros and has been on the verge of bankruptcy for some time. Last month, the company managed to avoid default in the last month. It is feared that the collapse of Evergrande could cause a knock-on effect in the Chinese real estate world and beyond. Several other Chinese real estate developers have already missed debt service deadlines in recent times. The Chinese government and the country’s central bank have indicated that they will ensure that any bankruptcies do not pose a threat to the entire financial system.

According to DMSA, Evergrande can be dismissed as a defaulter. Shortly before the grace period expired, rumors emerged about alleged interest payments. DSMA already recognized the default at the time and stated in a study that the bankruptcy of Evergrande could eventually lead to a “Great Reset”, ie the final collapse of the financial system.

In order to be able to file for bankruptcy as a creditor of the company, DMSA itself invested in Evergrande bonds, whose grace period expired on November 10. In total, Evergrande would have had to pay approximately $148 million in interest on three bonds. Particularly problematic for Evergrande is that all 23 outstanding bonds have a so-called cross-default clause. “This means that if one of these bonds defaults, all 23 outstanding bonds will automatically be in default status,” said DMSA analyst Marco Metzler.

In order to establish bankruptcy, an insolvency application must be filed with the court. This can be done by the company itself or by one or more creditors of the company. And that is exactly what is about to happen. DMSA is also in talks with other investors and hopes they will join the bankruptcy filing.

Evergrande defaults, bankruptcy proceedings initiated
Source link Evergrande defaults, bankruptcy proceedings initiated

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