Evergrande restructuring is well-balanced so far – Reuters

Evergrande restructuring is well-balanced so far – Reuters

HONG KONG, Sept 29 (Reuters Breakingviews) - China Evergrande’s (3333.HK) restructuring is being run on some useful populist principles. Local governments are stepping in to ensure suppliers don’t get stiffed and buyers receive apartments they paid for in advance, Caixin reports. Bigger investors in the struggling property developer will therefore shoulder significant losses, and that’s OK.

The company reported 165 billion yuan ($26 billion) of prepayments as of June 30. Also coming due are 951 billion yuan of trade payables. Combined, that far exceeds the $20 billion owed holders of Evergrande dollar bonds. The figures reflect founder Hui Ka Yan’s strategy of shifting liabilities away from state-controlled banks toward smaller, less powerful entities. The ploy removed risky debt from lenders’ balance sheets, but Evergrande also stopped paying vendors to conserve cash - and then contractors stopped building. It also began defaulting on wealth management products sold to ordinary investors and its own employees. read more