Chinese banks try to calm fears over developer debt

BEIJING — Seeking to quell fears of financial turmoil, some Chinese banks are revealing they’re in debt, saying they can deal with a possible default from a real estate developer struggling with debt under $310 billion.

The announcements came after Evergrande Group promised to speak to some individual investors who bought its debt, and creditors waited to see if Beijing would intervene to oversee a restructuring to avoid financial cuts.

Evergrande’s struggle to meet government-imposed debt limits has sparked fears that a default could disrupt the Chinese economy or global financial markets. While rating agencies say a default looks likely, economists say Beijing can avoid a credit crunch in China but wants to avoid bailing Evergrande and is trying to force companies to lower their debt levels.

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

“Overall risk is controllable,” the bank said in a written response to questions on a website operated by the Shanghai Stock Exchange. He said it’s risky. . . will not have a significant impact on the bank.

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

Changshu Rural Commercial Bank Co., in eastern Jiangsu province, said it has a land-backed 3.9 million yuan ($600,000) outstanding loan to Evergrande. Industrial and Commercial Bank of China Ltd. The largest state-owned commercial lenders, including the United States, did not answer questions.

Evergrande has been caught in the stricter borrowing limits imposed on real estate last year by regulators trying to curb rising debt levels.

Regulators have yet to say what Beijing can do, but economists say that if the ruling party steps in, it will likely focus on ensuring families get the flats they’ve already paid for, rather than trying to bail out banks or other creditors.

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

Other major developers, such as Vanke Co., state-owned Poly Group, and Wanda Group, did not report similar issues. But hundreds of small developers have shut down since regulators began tightening control over finances in 2017.

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

Evergrande said it was previously discussing details of an interest payment to banks and other bondholders in China on Thursday, but did not provide details.

The company has yet to announce whether it will make an overseas bond payment of $83.5 million due Thursday. It has 30 days before the default is declared, but economists say the company appears to be focused on paying back creditors in China.

Meanwhile, Evergrande is offering some investors to repay its debt with apartments and other properties.

The offer is available to investors with a total debt of approximately 40 billion yuan ($6 billion) issued by the Evergrande Wealth unit. News reports say it’s often retail customers, employees of Evergrande contractors, and the company’s own workforce.

Evergrande said on Thursday that investors can apply online for available properties.

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