China’s most indebted group has admitted — for the first time — that it may default on some of its borrowings. Local developer Evergrande once seemed to have no lack of fallback options in the event of a liquidity crisis. Recent events have undermined those assumptions.
Evergrande is struggling to service its $89bn debt pile. Shares are down 73 per cent this year and its dollar bond maturing in 2025 is down to about 25 cents on the dollar.
During normal times a cash crunch would not have been so serious. Local banks and other non-bank financial institutions, such as trust companies, could be counted on for a quick fix. It could sell off property and subsidiaries. Its debt pile may have been seen as too big to fail, making a government bailout likely.