BEIJING, Sept. 24 (BNA): In an effort to allay fears of financial turmoil, some Chinese banks are revealing what they are owed by a real estate developer struggling with less than $310 billion in debt, saying they can handle a potential default.
The announcements came as Evergrande Group promised to speak with some of the retail investors who bought its debt while creditors wait to see if Beijing will step in to oversee the restructuring to prevent financial turmoil, the Associated Press reported.
Evergrande’s struggle to meet government-imposed debt limits has raised concerns that a default could disrupt the Chinese economy or global financial markets. While rating agencies say a default appears likely, economists say Beijing can prevent a credit crunch in China but wants to avoid bailing out the Evergrande while trying to force companies to reduce debt levels.
Zheshang Bank, one of Evergrande’s largest lenders, said it owed 3.8 billion yuan ($588 million) and had “sufficient collateral.”
“The overall risk can be controlled,” the bank said in a written answer to questions on a website operated by the Shanghai Stock Exchange. “The risk situation … will not have a significant impact” on the bank, she said.
Other companies, including Shanghai Pudong Development Bank Ltd., did not provide any financial figures but said their lending was small, tied to individual projects and secured by land claims. Pudong Bank said it was in “close contact” with Evergrande.
Changshu Rural Commercial Bank Co., in eastern Jiangsu Province, said it had 3.9 million yuan ($600,000) in loans owed to Evergrande, secured by bribery. The largest state-owned commercial lenders including Industrial and Commercial Bank of China Ltd. did not respond to questions.
The Evergrande has been caught up in the strictest borrowing restrictions imposed on real estate last year by regulators trying to bring down soaring debt levels that the ruling Communist Party’s concerns could affect economic growth that is already in a long-term decline.
Regulators have not yet determined what Beijing could do, but economists say if the ruling party gets involved, it will likely focus on making sure families get the apartments they’ve already paid for, rather than trying to bail out banks or other creditors.
Evergrande is one of the largest private sector conglomerates in China, 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. have not reported. And state-owned Poly Group and Wanda Group reported similar problems. But hundreds of smaller developers have closed their doors since regulators in 2017 began tightening oversight of funding.
On Friday, Evergrande debt investors who gathered at the company’s headquarters in the southern city of Shenzhen said the company had agreed to hold a conference call with them. Dozens of police officers in six guard cars parked outside the building.
Evergrande said earlier it had negotiated the details of Thursday’s interest payment to banks and other bondholders in China but gave no details.
The company has not yet decided whether it will pay the $83.5 million that was due on Thursday for overseas bonds. It has 30 days before it says it defaults, but economists say the company appears to be focused on paying creditors within China.
Meanwhile, Evergrande has offered to pay off its debts to some investors through apartments and other properties.
The offer applies to investors holding a total of 40 billion yuan ($6 billion) of debt issued by the Evergrande Wealth unit. News reports indicate that they are typically retail clients and employees of Evergrande’s contractors and the company’s workforce.
Evergrande said Thursday that investors can apply online for available properties.
RAE