The Chinese real estate company Evergrande officially announced its insolvency this morning. At the same time, Kaisa, also from the real estate sector, did the same. Abergrand’s total debt stands at over $ 300 billion in a huge amount. The company has announced that it is trying to work with entities outside China in order to build a recovery plan. Kaisa’s total debt stands at $ 11.2 billion.
Last Monday, Kaisa was unable to meet payments on a $ 400 million bond. Evergrand failed to pay an interest payment of $ 82.5 million, in the latter two as well.
The announcement by the companies came after the Pitch debt rating assets defined them as insolvent. In the case of Evergrand, the fear now is of cross-insolvency: that is, insolvency in one of the series will lead to the cause of others to demand the position of the debt for immediate repayment – which is a total of $ 19.2 billion.
At Kaisa, the risk of cross-insolvency is estimated at $ 11.2 billion. The company had previously recovered from insolvency in 2015, when it became one of the leverage symbols of that crisis in the local real estate market.
The Governor of the Central Bank of China has announced that the shareholders’ rights in the two companies will be preserved as those of the creditors and he says Evergrand’s inability to meet its debts will be corrected by the capital market and that the impact of China’s real estate crisis will not affect the market as a whole.
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