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Evergrande: Avoid – for the time being – bankruptcy

The Chinese group Evergrande seemed to avoid bankruptcy with a last minute bond coupon payment and thus secure another week to manage the debt crisis lurking in the world’s second largest economy.

The second largest in China real estate developer transferred $ 83.5 million to a trust account at Citibank Yesterday, Thursday, a person with knowledge of the matter told Reuters today, a move that allows her to pay the interest on the bond in US dollars that she had to pay by October 23.

The news, according to the Athenian-Macedonian News Agency, eased investors and regulators worried about the wider impact of the company’s bankruptcy on international financial markets, and added that that the interests of creditors will be protected.

However, the most indebted company real estate with a liability of more than $ 300 billion – will have to make payments on a number of other bonds, with the next long deadline to avoid bankruptcy being October 29 and there is not much information on whether Evergrande is able to pay.

Avalanche problems

Her problems Evergrande It has become an avalanche in recent months and its meager resources, which contrast with its huge liabilities, have drained 80% of its value.

The real estate development company, founded in Guangzhou in 1996, was the epitome of an era of uncontrolled lending and construction. However, this business model was torpedoed by hundreds of new rules designed to reduce the real estate lending frenzy and promote affordable housing.

Analyst Travis Landy of Quiddity Advisors in Hong Kong estimates that the move means that Evergrande also plans to pay the coupon to be paid on October 29. “It makes no sense to pay for this if you do not plan to pay for it in the next six days, but given the liquidity difficulties reported by the company itself, it is unclear how long they will be able to do so.”

It was not immediately clear how the over-indebted Evergrande managed to raise funds to pay the bondholders or whether any of them had already received the money. Evergrande should now find $ 47.5 million by October 29, with payments of nearly $ 338 million for November and December.

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