The start of a bank run at Evergrande is the latest sign that China’s most indebted property developer will inevitably default on $305 billion of liabilities to banks, shadow lenders, suppliers and homebuyers unless Beijing bails it out similar to the last-minute rescue of China’s bad debt giant Huaron, which recently got a thumbs up from Beijing. However, in the case of Evergrande, so far authorities have yet to blink – despite the potentially cataclysmic consequences of a default – and as a result the developer’s bonds have plummeted to levels that suggest investors are bracing for a default.While Chinese regulators have urged the company to resolve its debt woes, the government has so far stayed silent on whether it will provide financial support.
Also on Friday, Bloomberg reported that Evergrande’s yuan bonds are no longer accepted as collateral in the country’s key funding market, cutting it off from another critical source of funding – the repo market – and adding to signs of increasing default risk.
The latest set of catastrophic news for the Chinese property developer – which has been struggling to convince investors, suppliers and creditors it can generate cash to make good on liabilities after payables rose to a record – was the straw that finally broke the camel’s back and on Friday, trading in several of Evergrande’s thinly-traded onshore notes was briefly halted on Friday to steep declines, while some of its dollar debt trades below 30 cents. The shares have lost 74% this year to the lowest since July 2015.Evergrande Bonds Halted Amid Liquidation Panic As Contagion Spreads To Other Chinese Junk | ZeroHedge