Evergrande, the Chinese real estate giant currently in bankruptcy proceedings, announced today that it will pay interest on a small portion of its debt; however, this did not reassure financial markets, which are waiting to see whether Beijing will come to the rescue of this private conglomerate.

Fears that China could see a repeat of what happened with Lehman Brothers—whose bankruptcy triggered the 2008 financial crisis in the United States—have led to a sharp decline in global stock markets in recent days.

All eyes are now on the Chinese government, which has not clarified whether it will assist this private conglomerate, which is burdened by approximately 260 billion euros in debt.
The real estate developer announced this morning that it had reached an agreement with bondholders regarding a small portion of its debt.

In a statement to the Shenzhen Stock Exchange in southern China, the company explained that one of its subsidiaries, “Hengda Real Estate,” had negotiated a repayment plan for interest on bonds maturing in 2025.
Bloomberg reported that Evergrande will repay 232 million yuan (30.5 million euros) in debt due Thursday on these 5.8 percent bonds, which are limited to the domestic bond market.
The statement clarified that bondholders “who purchased them” before Wednesday “are entitled to receive interest.”

– A Bleak Outlook –

However, this does not solve the problem for the Shenzhen-based real estate development giant, given its enormous total debt.
There are other bonds on the global market maturing tomorrow, but the group has not clarified how it will repay them.

Gary Dogan of the Singapore-based consulting firm Global CIO said that the announcement of a partial repayment "will help, and hopefully it will somewhat reduce market volatility and the downturn."
He told Bloomberg, “But for confidence to truly be restored, the market needs to see prospects for Evergrande’s restructuring.”

However, Chinese authorities have not clarified whether they will help improve the company’s financial situation, as 1.4 million of its housing units remain unfinished, sparking discontent among many who purchased these properties.
Dozens of them protested last week in front of the group’s headquarters and in other parts of the country. Creditors, employees, and suppliers are demanding that the company pay what it owes them. This real estate giant had been ramping up its investments until Beijing tightened borrowing rules last year.

– “A Dark Period“ –

The group’s chairman assured employees that Evergrande ”will soon emerge from its darkest period," according to a state-run media outlet.
Xu Jiayin, who was once among China’s wealthiest individuals, said that all construction sites would resume work and that the group would provide "a response to buyers, investors, companies, and financial institutions“ without giving any further details.

However, the announcement of interest payments was not enough to reassure the markets, as the Shenzhen and Shanghai stock exchanges posted declines this morning after a four-day hiatus due to a public holiday.
The Hong Kong Stock Exchange is also closed today.

Analyst Michael Hoson of CMC Markets said, ”Investors are wondering whether the Chinese authorities are capable of handling the fallout after the financial maturities expire.“
He noted that Evergrande’s default appears to be a foregone conclusion and is ”only a matter of time,“ while ”the real question is how“ this crisis will be managed.