China Evergrande Group vowed on Friday to repay all of its matured wealth management products as soon as possible, as the country’s second-largest property developer struggles to restructure a mountain of debt and avoid a possible default.
Worries surrounding Evergrande, which has been scrambling to raise funds to pay lenders and suppliers, have grown into broader concerns that a debt crisis could send shockwaves through China’s banking system. Regulators in Beijing have endorsed a company proposal to renegotiate payment deadlines with banks and other creditors, giving the troubled developer ”a temporary reprieve,” Bloomberg News reported on Thursday.
Chairman Hui Ka Yan sought to reassure investors in a company forum, after a litany of news reports this week on the company’s financial problems.
“I can have nothing, but the investors of Evergrande’s wealth management products cannot have nothing!” Hui told the forum.
He said Evergrande is facing the greatest challenges, but its fundamentals including annual property sales of 700 billion yuan ($108.72 billion) stay the same.
Some creditors had agreed to extensions on loan repayments, sources said, but market watchers say that may only buy the company a short period of time. Regulators have warned that Evergrande’s $305 billion of liabilities could spark broader risks to the country’s financial system if not stabilised.
Financial information provider REDD reported on Friday that Evergrande had outlined an interim repayment plan for retail investors on Thursday, which suggested it would repay matured wealth management products of less than 100,000 yuan on Sept. 9. REDD cited three product holders.
But those holding more than 100,000 yuan will have their payments extended by two to four years and amortized, with the first payment to be made next year, while payments to institutional investors will be suspended to an undecided date.
REDD did not give a figure for the total amount of wealth management products covered in the plan. It had reported on Wednesday that Evergrande may suspend all of the payments.
Capital Economics said in a report on Thursday that Evergrande’s collapse would be the biggest test that China’s financial system has faced in years because of the potential for contagion.
“Policymakers’ main priority would be the households that have handed over deposits for properties that haven’t yet been finished,” it said. ”The company’s other creditors would suffer,” it said, adding China’s central bank would likely step in with liquidity support in the event of a large-scale default.
Shares of Evergrande recovered 2% on Friday to HK$3.62. But the stock has lost 76% so far this year.
JPMorgan slashed its price target for the stock to HK$2.80 from HK$7.20 on Friday, saying there was likely to be more negative news about its finances.
• Reuters and Kevin Hamlin
This story was updated to add a category.