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EXCLUSIVE: The Beginning of China’s Economic Collapse? Largest Issuer of China’s Commercial Paper, Evergrande, Is Facing Bankruptcy, Entire World Economy Likely Impacted

By Joe Hoft

Another corporation involved in China’s real estate bubble is about to pop. 

Yesterday the Bangkok Post reported:

Embattled Chinese property giant Evergrande on Wednesday suffered a second credit rating downgrade in two days, raising fears the world’s most indebted company will default and sending its shares tumbling below their listing price 12 years ago.

The Hong Kong-listed firm has run up a mountain of liabilities totaling more than $300 billion after years of borrowing to fund rapid growth and a string of real estate acquisitions as well as other assets including a Chinese football team.

This morning the situation is reportedly worse, this time reports out of Hong Kong show that China real estate giant, Evergrande, is in severe financial trouble due to its more than $300 billion in debt outstanding.

Shares in the embattled Chinese property giant Evergrande have slumped again after two credit downgrades in two days amid concerns that it will default on parts of its massive $300bn debt pile.

Evergrande, which is one of the world’s most indebted companies, has seen its shares tumble 75% this year. They fell by almost 10% on Thursday morning to HK$3.35, which is below the listing price when the company floated on the Hong Kong market in 2009.

Trading in one of the company’s bonds was suspended by the Shenzhen stock exchange on Thursday morning after the price plunged 20%.

The online market trading platform IG said Evergrande posed “a risk of contagion” after Bloomberg reported that Credit Suisse and Citibank were no longer accepting the bonds of another highly indebted Chinese property developer, Fantasia, as collateral.

Evergrande issues commercial paper (unsecured IOU’s) to pay its debts.  It happens to be the largest issuer of commercial paper in China with $305 billion in debt and it is in financial duress.

Is it really surprising that China’s real estate bubble would eventually impact the world’s economy?  We’ve been warning of this for years.

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