Evergrande Update: Tick-toc as crucial debt default deadline looms

Markets are thinking twice about the contagion risks surrounding the embattled Chinese property company Evergrande. rescue efforts are being reported to have stalled and the property giant is seemingly on the brink of default.

The Guardian is warning of contagion through the country’s giant real estate sector, home prices and the economy.

''The problems enveloping Evergrande, which has eyewatering total debts of $305bn, have hung over global financial markets in recent weeks and helped curb China’s post-pandemic recovery,'' an article by the Guardian explained. 

''But the crisis could deepen further if Evergrande fails to meet a deadline of Monday to stump up a $83.5m bond interest payment, triggering an official default.'

The article went on to say that ''Evergrande has already been given a 30-day grace period to make the repayment after missing the initial deadline back in September. It has since missed other key offshore, dollar-denominated bond payments worth another $193.3m. The clock is now ticking on those debts as well.''

Meanwhile, Reuters reported that in its Wednesday filing, ''Evergrande said it would continue to implement measures "to ease the liquidity issues" and would use best efforts to negotiate for the renewal or extension of its borrowings with its creditors.''

"In view of the difficulties, challenges and uncertainties in improving its liquidity, there is no guarantee that the group will be able to meet its financial obligations under the relevant financing documents and other contracts," it said.

Market implications

The Australian dollar has been a strong performer, shrugging off such risks of a Chinese economic meltdown. However, the nation is highly vulnerable to such an outcome and AUD/USD will take the brunt of it should traders acknowledge the hugely negative ramifications of Australia losing its Chinese export business. 

So far, ''creditors have said there has been no contact from Evergrande despite weeks of effort on their behalf. Evergrande will officially be in default if it doesn't make an already overdue March 2022 bond coupon payment by Monday,'' Reuters reported.