The ‘Great Wall of China’ Evergrande is hollow and the ‘Forbidden City’ of Kaisa is turbulent.
Shares of Evergrande Group China hit a record low on Wednesday when it once again missed its debt payment deadline putting the firm at risk of becoming China's largest company subject to default status despite a debt restructuring plan that eased chaos.
So far, any fallout of Evergrande has been widely curbed and policymakers have become more vocal as well as the market being more focused on the issue as the consequences of the problem will be widely felt.
Evergrande's failure to make US $ 82.5 million in interest payments due last month on several US dollar bonds will trigger defaults on its US $ 19 billion international bonds that are likely to affect the Chinese economy.
Meanwhile, Kaisa Group Holdings was suspended on Wednesday according to a source who said the firm passed the US $ 400 million offshore debt deadline on Tuesday.
Kaisa has yet to repay its 6.5% bond by the end of the Asian trading session, which could push the firm into default and trigger defaults on offshore bonds amounting to US $ 12 billion.
Evergrande shares were down 1.6%at HK $ 1.80 after hitting a low of HK $ 1.78 recorded during its 2009 debut.
Kaisa bonds due in April 2022 traded at 36.906 slightly up from the previous day but down from 37.89 last week.
Evergrande was once China’s leading real estate developer with more than 1,300 real estate projects but with US $ 300 billion in liabilities, it is now in the midst of a real estate crisis in China that has crushed nearly a dozen smaller firms.
The government has repeatedly said Evergrande’s problems can be curbed and move to increase liquidity in the banking sector along with the firm’s plans to continue its external debt restructuring to help reassure global investors.
