Published on: Amended:

Beijing (AFP)

Struggling Chinese real estate giant Evergrande said on Wednesday it had reached a deal with domestic bondholders that should allow the conglomerate to avoid default on one of its interest payments.

Financial markets tumbled amid fears that the Chinese group might collapse, with the potential to derail the world’s second-largest economy.

In a statement to the Shenzhen Stock Exchange, Evergrande’s real estate unit Hengda said it had negotiated a plan to pay interest due on its 2025 bond, which Bloomberg News said was worth 232 million yuan (35.9 millions of dollars).

There was no mention of his interest repayments for an offshore bond.

In the statement, Hengda said investors “who bought and held the bonds” before September 22, 2021 “are entitled to the interest paid this time.”

Analysts said the repayment would go some way to appease anxious markets in the short term.

But “for confidence to return more significantly, the market will need to see Evergrande’s sweeping restructuring plans,” Gary Dugan, managing director of the Global CIO Office, told Bloomberg.

The Evergrande crisis has even sparked rare protests outside the company’s China offices from investors and suppliers demanding their money – some say they are owed up to $ 1 million. .

– ‘Huge pressure’ –

Despite being primarily a developer, Evergrande – which employs 200,000 people, operates in more than 280 cities, and claims to indirectly generate 3.8 million Chinese jobs – has been in the throes of a buying frenzy for over a decade.

But the group admitted to facing “tremendous pressure” as it tackles debt of more than $ 300 billion, and warned it may not be able to meet its debts.

Earlier this week, Xu Jiayin, the founder of the company, told staff that he believed the group would “come out of the darkest moment soon.”

The company has hired experts, including financial services firm Houlihan Lokey – which advised the restructuring of Lehman Brothers – as it tries to avoid a collapse.

Bloomberg reported last week that state regulators dispatched a team of financial advisers to assess the company.

Abdul Abiad, director of the macroeconomic research division of the Asian Development Bank, told reporters in a virtual briefing that “the capital cushions of the Chinese banking system are strong enough to absorb a shock even the size of Evergrande, if it materializes “.

“This deserves careful monitoring because housing is an important component of the Chinese economy … housing represents a substantial part of household wealth, so obviously, if the real estate sector is affected, it could have repercussions on the economy. Chinese as a whole, ”he added. added.

In a report released earlier this week, the S&P rating agency said it believes authorities in Beijing will step in if they consider large-scale fallout is likely to materialize.