The forecasts of the financial corporation Fitch Ratings, as well as the credit rating agency S&P and the financial consultants of BBVA, predict that the Evergrande company will not comply with its creditors and will be liquidated or forced into a restructuring by the Government.

Evergrande revealed last Friday that the company would sell 40% of Qumei Home Furnishing, its furniture production business, for about 9.48 million euros. Unofficially, it was known that the giant would also be negotiating the sale of 51% of its subsidiary Hopson Development Holdings, for an approximate value of 2,573 million euros.

To these amounts are added some 8,241 million euros that the giant has received after the sale of its 20% stake in a regional bank in September and of percentages of its electric vehicle and technology businesses in the first half of the year.

All this after his attempt to raise the money to pay his creditors. The company revealed that it had paid off a debt in yuan on Monday, however, it has not given any news about the payment of its debts in dollars.

On October 23 and 29, the company will face the expiration of two grace periods to pay bonds in dollars, for the value of 131 million (approximately 113 million euros).

Evergrande has not stopped falling on the stock market since September, when it recognized that it will probably not be able to honor the debt of around 254,000 million euros that it has with its creditors. These statements demolished its already poor credit ratings and caused its shares to plummet in such a way that the giant was forced to suspend its listing on the Hong Kong stock exchange on October 4.

China braces for the fall of Evergrande

So far, Beijing has not shown any signs of a bailout. The Xi Jinping government has limited itself to injecting liquidity to stabilize the market in recent weeks and loosening control over real estate loans. However, this Friday a representative of the People's Bank of China assured that the risks of the Evergrande crisis are under control and added that the authorities are managing the crisis with “market-oriented” measures.

During the presentation on Monday of the Chinese GDP figures, the authorities have attributed the fall in growth to 4.9% to the real estate crisis.

The crisis in the Chinese real estate sector is not limited to Evergrande. Information compiled by Bloomberg affirms that 64,000 million of the 139,000 million dollars in debt of high-risk bonds correspond to Chinese promoters. This Friday, the profitability of junk bonds in this sector stood at around 20%, its highest in a decade.

Yichu Wang, a researcher at Tsinghua University in Beijing, has assured Cinco Días that it is most likely that the company will enter the restructuring process and that the government will take measures to protect small creditors: “The Government will not be the 'gentleman White'. Evergrande's debt is not big enough to make it "too big to fail." In addition, the central government could be willing to use it as an example and thus show its determination regarding the new regulation of the real estate sector, ”he adds.

Wang affirms that Evergrande will not be the only real estate company to fail: “Behind this debt crisis there is a policy change that is going to affect the entire real estate sector. The market did not expect the Chinese government's determination to control the housing boom to be so inflexible. More and more developers will suffer from financial restrictions, especially in terms of loans.

Requesting extension

In the last week, Fitch Ratings has downgraded the ratings of Modern Land China and Xinyuan Real Estate, two other real estate giants that are also at risk of default, to “C”. This Monday, Modern Land requested a three-month extension to pay a debt of about 215.5 million euros. For its part, Xinyuan has proposed to pay only 5% of a debt that matured on October 15 and exchange the rest for bonds maturing in 2023. With these decisions, the companies join Fantasía Holdings and Sinic Holdings on the list of real estate that follow the Evergrande trend. And despite calls for calm from the Chinese authorities, its real estate sector remains one of the great fears of international investors.