Evergrande is not running out of money yet, says a bond expert who expects China's government to 'force collaborations' between stakeholders

Warut Promboon (Bondcritic's credit research chief), stated that Evergrande was too large for the Chinese government.
Warut stated that Evergrande isn’t insolvent, but the problem is liquidity.

Evergrande has $500 Million in payments due by Year-End, or 0.17% of its $300 Billion debt pile.

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The debt crisis in Evergrande will continue, but it will be managed as the Chinese government will "force collaborations" between stakeholders. This is according to a credit expert who has been studying Evegrande bonds from 2011.

Warut Promboon (head of credit research at Bondcritic), wrote in a note that "Evergrande was too large for the Chinese government not to ignore."

China Evergrande, the real estate giant, is the world's largest indebted firm with a debt pile of $300 billion. It was able to pay two outstanding coupons in time and avoided a default that could have devastating consequences for the rest. These two payments amounted to $127.7million, which is a small fraction of Evergrande’s total debt.

Warut said last week that despite Evergrande's debt problems, it is unlikely the company is out of cash. Because a company of Evergrande's size will still have money in different locations, including subsidiaries. It's not about how corporate treasury can move funds around.

Warut wrote in a note posted on Smartkarma that "we believe the problem is the company's ability to move its liquidity around the organisation to pay back the debt."

He said that the credit crisis in China's property sector will be contained by China's political system, which empowers regulators with "heavy hand" which will lead to collaborations between issuers, investors and intermediaries, who are often owned or influenced directly by the government.

Chinese officials sought to calm nerves over the debt crisis by publicly chastising Evergrande. They told it to solve its debt problems and instructed the country's real-estate developers to pay overseas bondholders. Bloomberg reported, citing sources familiar with the matter that Beijing had also instructed Hui Ka Yan, Evergrande’s billionaire founder to pay the debt.

China Evergrande still owes $500 million to China by the end this year, or 0.17% of its $300 Billion debt.

Warut stated that the Chinese government would closely monitor Evergrande's construction schedule and debt payments. He said that assets sales, which include project sales to other developers are likely to continue, and the transactions will be administered or brokered by Chinese regulators.

Warut stated that the entire process could take many years. He cited HNA, an embattled Chinese conglomerate, as an example. The trouble started in 2017. The company began to sell its assets and is currently in the midst a restructuring push.

Evergrande is likely to follow the HNA route, eventually leading to "a smaller Evergrande", Warut stated.