Evergrande's Biggest Lender Says Default Will Not Have 'Significant Impact' on Bank

Chinese banks, hoping to calm investors, are revealing what they are owed by a struggling real estate developer with $310 billion in debt, saying they can handle the possibility of a default, according to the Associated Press.

Zheshang Bank Co., one of Evergrande Group's largest lenders, said it is owed 3.8 billion yuan ($588 million), adding that it has "sufficient collateral."

"The overall risk is controllable," Zheshang said in a written answer to questions on a website run by the Shanghai Stock Exchange. It added that a "risk situation...will not have a significant impact" on the bank.

Evergrande, meanwhile, said it would talk to some individual investors in its debt, while other creditors are watching Beijing to see if it will intervene with a restructuring plan, the AP said.

For more reporting from the Associated Press, see below.

Evergrande
Evergrande Group, one of China's biggest private-sector conglomerates, is struggling to meet government-imposed debt limits. Above, men on electric bikes wait for riders near the Evergrande headquarters, left, in Shenzhen, China, on Friday. Ng Han Guan/AP Photo

Evergrande's struggle to meet government-imposed debt limits has prompted fears a default might disrupt the Chinese economy or global financial markets. Ratings agencies say a default is likely. Economists say Beijing can prevent a credit crunch in China but wants to avoid bailing out Evergrande while it tries to force companies to reduce debt levels.

Others, including Shanghai Pudong Development Bank Ltd., gave no financial figures but said their lending was small, tied to individual projects and secured by claims to land. The Pudong bank said it was in "close communication" with Evergrande.

Changshu Rural Commercial Bank Co. in the eastern province of Jiangsu said it is owed 3.9 million yuan ($600,000). The biggest state-owned commercial lenders including Industrial and Commercial Bank of China Ltd. didn't respond to questions.

Evergrande was caught by stricter borrowing limits imposed on real estate last year by regulators who are trying to reduce surging debt levels the ruling Communist Party worries might drag on economic growth that already is in long-term decline.

Regulators have yet to say what Beijing might do, but economists say if the ruling party gets involved, it probably will focus on making sure families get apartments they already have paid for, rather than trying to bail out banks or other creditors.

Evergrande is one of China's biggest private-sector conglomerates, with more than 200,000 employees, 1,300 projects in 280 cities and assets of 2.3 trillion yuan ($350 billion). It owes creditors some 2 trillion yuan ($310 billion).

Other major developers, such as Vanke Co., state-owned Poly Group and Wanda Group, have not reported similar problems. But hundreds of smaller developers have shut down since regulators in 2017 started tightening control over financing.

On Friday, investors in Evergrande debt who gathered at its headquarters in the southern city of Shenzhen said the company agreed to hold a phone meeting with them. Dozens of police officers with six vehicles stood guard outside the building.

There was no word on whether that meeting took place, but an investor from Shanghai said he talked separately with Evergrande employees and was told the company has little cash and no "concrete solution." The man asked not to be identified by name to avoid attracting attention to himself and wouldn't say how much money he had at stake.

Evergrande said earlier it negotiated details of an interest payment due Thursday to banks and other bondholders in China but gave no details.

The company has yet to say whether it will make an $83.5 million payment that was due Thursday on a bond abroad. It has 30 days before it is declared in default, but economists say the company appears to be focused on repaying creditors within China.

British bank HSBC Holdings PLC, reported earlier to be an investor in the bond, declined to comment.

Meanwhile, Evergrande is offering to repay some creditors by handing over apartments and other property.

The offer applies to investors who hold a total of about 40 billion yuan ($6 billion) of debt issued by its Evergrande Wealth unit. News reports say they usually are retail customers, employees of Evergrande contractors and the company's own workforce.