Evergrande must not rely on bailout, says Global Times editor

Hong Kong — The editor-in-chief of state-backed Chinese newspaper Global Times warned debt-ridden property giant Evergrande Group that it should not bet on a government bailout on the assumption that it is “too big to fail”.

It was the first commentary to appear in state-backed media casting doubt on a government bailout for the country’s No 2 property developer, whose shares fell on Friday for the fifth consecutive day amid concerns it is heading for default.

Evergrande is scrambling to raise funds to pay its many lenders and suppliers and investors, with regulators warning its $305bn of liabilities could spark broader risks to the country’s financial system if not stabilised.

Global Times editor-in-chief Hu Xijin said on his WeChat social media account on Thursday that Evergrande should turn to the market for salvation, not the government.

He said Evergrande’s potential bankruptcy was unlikely to trigger a systemic financial storm like the collapse of Lehman Brothers, because it was a real estate business not a bank and down payment ratios on property in China were very high.

Global Times is a nationalistic tabloid published by the Communist Party’s People’s Daily. Its views do not necessarily reflect the official thinking of policymakers.

Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers increasingly think a direct bailout from the government is unlikely.

A group of Evergrande’s offshore bondholders has selected investment bank Moelis & Co and law firm Kirkland & Ellis as advisers on a potential restructuring of a tranche of bonds, focusing on about $20bn in outstanding dollar bonds in the event of nonpayment, sources said.

Evergrande is due to pay $83.5m interest on September 23 for its March 2022 bond. It has another $47.5m interest payment due on September 29 for the March 2024 notes. The bonds would default if Evergrande fails to pay the interest within 30 days.

The debacle of Evergrande - which has more than 1,300 real estate projects in over 280 cities - is dampening the yuan and confidence in Chinese assets more broadly.

Evergrande shares fell another 13% to HK$2.28 on Friday, the lowest level since October 2011. Its offshore October 2023 bond fell 10% to 16.125c.

China Minsheng Banking Corporation, one of Evergrande’s major lenders, dropped 4.6% to a record low of HK$2.80.

Reuters