Evergrande

Evergrande The Troubled Chinese Real Estate Developer has remitted the funds for a key interest payment that was due Sept. 23 — ahead of a 30-day grace period that ends Saturday, Chinese state media Securities Times said Friday.

The $83.5 million interest payment that was due Sept. 23 on Evergrande's March 2022 offshore bond has been closely watched since the heavily indebted property developer warned twice in September that it may default. Although the company missed the Sept. 23 deadline, it has a 30-day grace period before formally defaulting. U.S. dollar bonds are largely held by foreign investors.

PricewaterhouseCoopers earned over forty million dollars in fees auditing China Evergrande and signed off on the accounts presented to them by management for all of those years.

PWC is likely to face criticism over the level of push back they gave to management over accounting policies that could have shown warning signs about the company’s financial health many years before the collapse.

Thousands of high-end flats bankrolled by Chinese developers lie unfinished and unsold in Central London as Chinese developers come under pressure from the “three red lines” that seek to curb excessive leverage across the Chinese property sector by limiting the amount property companies can borrow. Could Evergrande impact global property prices?

Fantasia Holdings, a Chinese developer of luxury apartments missed $315 million in payments to lenders on Monday, sparking fears that financial strains in the country's outsized property sector are spreading beyond the troubled Evergrande conglomerate.

Fantasia Holdings, a Shenzhen-based developer, missed repaying $206 million worth of bonds that matured Monday, the company said in a stock exchange filing. It is now assessing "the potential impact on the financial condition and cash position of the group," it added.

Separately, the property management unit of Country Garden, China's second largest developer by sales after Evergrande, said in a filing that Fantasia had failed to repay a company loan of about 700 million yuan ($109 million). Fantasia had informed the company that it would probably "default on [its] external debts," Country Garden Services added.

Investors have been on tenterhooks over whether China Evergrande would default on $83m in dollar bond interest payments this week.

That may come down to semantic and legal arguments over what “default” means. The bigger issue is whether a two-tier China bond market is emerging, with domestic currency investors advantaged over foreign currency bondholders.

The financial woes of Evergrande the once-mighty Chinese property developer highlight a showdown between two competing objectives for China's Communist Party.

They aim to force China's private sector away from speculative and risky lending practices while avoiding a financial meltdown and the collapse of the property sector, in which more than 70% of the nation's urban wealth is locked up.

In an interview with local media, an Evergrande financial adviser said the products were a type of “supply chain finance”. While the money from retail investors may in years past have gone to its suppliers, the Evergrande executives in Shenzhen receiving retail investors said this was no longer the case.

One of the executives of Evergrande’s wealth management division said Hubei Gangdun was just a shell company. “Proceeds from the Wealth Management Products have been used to bridge various funding gaps faced by the parent company,” the executive said. “There is no need to thoroughly examine where the money actually went.

“Some WMP proceeds were used to repay previous products but sales plummeted, making it difficult for the business model to continue,” he admitted. - This is essentially the definition of a Ponzi Scheme.

Wall Street is keeping a close eye on the situation, which highlights the extraordinary amount of borrowing Chinese companies and families have taken on over the years.

For now, investors seem confident that authorities in Beijing would use their vast control over the Chinese economy to limit the damage. And there is no evidence, at least so far, of contagion in US markets.

The liquidity crisis at Chinese property developer Evergrande shook global markets this morning with stocks falling in Asia, Europe and New York.

The S&P 500 fell 2.1 per cent in afternoon trading, while the Nasdaq Composite slipped 2.6 per cent. The Vix, which measures expected volatility on the S&P, hit 26.5 — around its highest level since May.

Monday’s sell-off came after shares in Evergrande, the world’s most indebted property developer, closed 10 per cent lower in Hong Kong to hit their weakest level since May 2010.

Concerns about the broader health of China’s real estate sector triggered a wider sell-off, sending the Hang Seng Property index, which tracks a dozen listed developers, down almost 7 per cent to its lowest point since 2016. At 24,099 points, Hong Kong’s broader Hang Seng index closed at its lowest level since last October.