China Evergrande Group has made a key debt payment on time in the latest sign of a recovery at the country’s ailing property industry, state media reported.
The company said on Monday that it had paid down some of its debt by 2.68 billion yuan ($459 million), according to the People’s Daily, the official newspaper of the Chinese Communist Party. The company also pledged that its financial woes are not a problem for the construction industry. The bond payment has been labeled “unprecedented” by Reuters.
Other Chinese companies also have met their obligations in recent weeks and sent a positive signal to the global financial markets that have been freaked out by the debt crisis in China, at times threatening to tip the country into default. Before Evergrande, Bank of China Capital Markets took a decade to make its first ever bond payment. Even though state companies largely have access to cheap credit from state-owned banks, many are struggling to repay bonds as they buy back heavily discounted assets at prices lower than what the market was willing to pay.
If Evergrande had missed the payment, it would have had to make it pay 20 percent interest as of May 16. Creditors could have declared the company in default as a result. But even though it missed the payment, the company still had about $148 billion in total debt at the end of 2018, about twice the annual revenues of the Shenzhen-based firm.
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