Despite the raging fear among the global investors, the debt- clad company’s Chairman said in a letter to staff that the company is confident it will “walk out of its darkest moments.”
The global share markets are startled and clutched amid the engaging fear caused when China Evergrande crisis led to the richest 500 people losing $135 million cumulatively.
Tesla’s Elon Musk and Amazon’s Jeff Bezos incurred the losses of $7.2 billion and $5.6 billion respectively according to Bloomberg Billionaire Index. The founder of Pinduoduo, Colin Huang has also suffered a major share of loss worth $29.4 collectively this year and $2.3 billion on Monday.
Evergrande, a real estate giant in China, is reportedly struggling to repay the interest payments on its debts after the introduction of new rules in Beijing which moved the company to present its properties at major discounts. The company’s shares fell down 10.2 % noticeably on Monday.
A significant test for China Evergrande Group is coming this week. The fortune 500 company is currently due to pay around $83.5 million in interest as per its March 2022 bond on Thursday along with another payment of $47.5 million due on September 29 for March 2024 notes as reported by the Reuters.
Fear of non-payment still persists among global investors as the highly indebted company will be defaulted if it fails to settle its payment of interests within 30 of the slated payment dates. It will lead to credit crunch in the world’s second largest economy where the lending entities will most likely be asked to curtail the lending amount.
The company’s crisis has caused turmoil in share markets globally, spreading threats of its current troubles becoming China’s ‘Lehman moment’.
The debt-clad company’s Chairman, Hui Ka Yuan, puts in efforts in order to restore confidence in its property business. He mentioned in a letter to staff on September 21, 2021, that the company is confident it will “walk out of its darkest moments”. He also ensured that the company will discharge its responsibilities towards its investors, financial institutions, property buyers, and partners.
He shared, “I firmly believe that with your concerted effort and hard work, Evergrande will walk out of its darkest moment, resume full-scale constructions as soon as possible.”
What is the reason behind Evergrande’s crisis?
The China’s real estate giant, Evergrande borrowed more than $300 billion in order to expand its business operations. However, Beijing introduced new rules last year with the view of controlling the debt amount owed by real estate giants which moved Evergrande to list its properties at huge discounts. This step was undertaken in order to make sure the credit standing of the company is strong enough to keep its business operational as reported by BBC. Consequently, the company started battling in the market to fulfill its interest payments. This has moved the company in the spotlight where its share price also fell down by 85% this year.