Shares in Chinese property developer China Evergrande plummeted 20% after the company announced that it may not be able to meet interest payments falling due today.
The developer, which is struggling with debts of over US$300bn, has stumbled from deadline to deadline and has so far made three 11th hour interest payments.
Today marks the end of another 30-day grace period with US$82.5mln due.
But the company said at the weekend that there was no guarantee that it would be able to meet its obligations and announced that creditors had demanded payments of US$260mln.
Evergrande founder Xu Jiayin was summoned by authorities to explain the statement, according to news reports.
Meanwhile, Guangdong’s provincial government said it was sending a team to Evergrande to supervise risk management and strengthen internal control – a signal that Evergrande has probably entered a managed restructuring process, according to Reuters, citing analysts.
Morgan Stanley (NYSE:MS) said a restructuring process would involve coordination between authorities to maintain operations of property projects and negotiations with onshore creditors to ensure financing for project completion.
It would also involve debt restructuring discussions with offshore creditors after operations stabilise, the US investment bank said.
Evergrande fell 20% to close at an all-time low of HK$1.82.
There are also concerns about contagion to other companies in the property development sector, with analysts warning that a third of China’s developers to face debt repayment problems.
On Monday a smaller developer, Sunshine 100 China Holdings Ltd, said it defaulted on $170mln payment that had been due on Sunday.
Meanwhile, sources told Reuters that Kaisa Group Holdings Ltd has begun talks with bondholders to extend the deadline for its US$400mln debt repayment.
China Aoyuan Property Group Ltd last week said creditors have demanded repayment of US$651.2mln and that it may be unable to pay due to a lack of liquidity.