Chinese banks are trying to allay fears of developer debt

Some Chinese banks are trying to dispel fears of financial turmoil and reveal what they owe to a real estate developer struggling with $ 310 billion in debt

BEIJING – Trying to dispel fears of financial turmoil, some Chinese banks are revealing what they owe to a real estate developer struggling with $ 310 billion in debt and say they can handle a possible default.

The announcements came when the Evergrande Group promised to talk to some individual investors who bought their debt while creditors waited to see if Beijing would intervene to monitor a restructuring to prevent financial turmoil.

Evergrande’s struggle to meet the government’s imposed debt limits has given rise to fears that a standard could disrupt the Chinese economy or global financial markets. While credit rating agencies say a standard seems plausible, economists say Beijing can prevent a credit crunch in China but wants to avoid rescuing Evergrande while trying to force companies to reduce debt levels.

One of Evergrande’s largest lenders, Zheshang Bank Co., said it owed 3.8 billion yuan ($ 588 million) and had “sufficient security”.

“The overall risk is controllable,” the bank said in a written response to questions on a website operated by the Shanghai Stock Exchange. There was a “risk situation… Will not have any significant impact” on the bank.

Others, including Shanghai Pudong Development Bank Ltd., did not provide financial figures but said their lending was small, tied to individual projects and secured by land claims. Pudong Bank said it was in “close communication” with Evergrande.

Changshu Rural Commercial Bank Co. in the eastern province of Jiangsu said it had 3.9 million yuan ($ 600,000) in outstanding loans to Evergrande, secured by land. The largest state commercial lenders including Industrial and Commercial Bank of China Ltd. did not answer questions.

Evergrande was caught by stricter property loan limits last year by regulators trying to reduce rising debt levels that the ruling Communist Party’s concerns could drag on long-term economic growth.

Regulators have not yet said what Beijing can do, but economists say if the ruling party gets involved, it will probably focus on ensuring families get apartments they have already paid for, rather than trying to save banks or other creditors. .

Evergrande is one of China’s largest private conglomerates with more than 200,000 employees, 1,300 projects in 280 cities and assets of 2.3 trillion yuan ($ 350 billion). It owes creditors about 2 trillion yuan ($ 310 billion).

Other major developers such as Vanke Co., state-owned Poly Group and Wanda Group have not reported similar problems. But hundreds of smaller developers have closed since regulators began tightening control over funding in 2017.

On Friday, investors in Evergrande debt gathered at its headquarters in the southern city of Shenzhen said the company agreed to hold a conference call with them. Dozens of police officers with six vehicles stood guard outside the building.

Evergrande previously said it was negotiating details of an interest payment on Thursday to banks and other bondholders in China but gave no details.

The company has not yet said whether it will make a payment of $ 83.5 million that would be paid on Thursday on a bond abroad. It has 30 days before it is declared the default, but economists say the company appears to be focused on repaying creditors within China.

Meanwhile, Evergrande offers to repay some investors in their debt with apartments and other property.

The offer applies to investors who have a total of about 40 billion yuan ($ 6 billion) in debt issued by its Evergrande Wealth unit. News reports say they are usually retail customers, employees of Evergrande contractors and the company’s own staff.

Evergrande said Thursday’s investors can apply online for available properties.

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