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aws试用账号(www.2km.me)_Trust firms at risk brace for Evergrande defaults

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Should Evergrande be declared in formal default on its bonds, a wave of cross defaults could be triggered, giving trusts limited room to negotiate extensions with investors or bridge over payment lapses by dipping into their own pockets.

BEIJING: Trust firms that have issued at least US$5bil (RM21bil) in high-yield products linked to China Evergrande Group are bracing for a cascade of losses after the cash-strapped developer said it may no longer be able to meet its financial obligations.

At least three firms, including Citic Trust Co, China Foreign Economy and Trade Trust Co and National Trust, notified clients over the past few days that they risk missing payments on Evergrande products due to the developer’s strained finances and will take legal action to protect investors, people familiar with the matter said, asking not to be named discussing private deliberations.

At least five trust companies held emergency meetings over the weekend to discuss how to handle potential disputes with investors, the people said.

The meetings illustrate how a key group of onshore Evergrande creditors are responding to a Friday statement from the developer in which it formally acknowledged for the first time the need to restructure offshore debt.

Should Evergrande be declared in formal default on its bonds, a wave of cross defaults could be triggered, giving trusts limited room to negotiate extensions with investors or bridge over payment lapses by dipping into their own pockets, said one of the people.

None of the trust firms were immediately available to comment. Evergrande didn’t immediately respond to a request for comment.

Evergrande counts trust companies, which pool money from wealthy individual investors, as an important source of funding – accounting for about 40% of borrowings at the end of 2019, when it last disclosed the figures.

While the firms have been reducing their exposure to Evergrande and its peers since then, they continue to be massive lenders with at least US$12bil (RM51bil) in developer-linked trust payments due just this month.

The risk of contagion into the US$3 trillion (RM13 trillion) trust industry will add pressure on policy makers to ease the crunch in the real estate sector, which has already triggered protests by home-buyers and investors in wealth management products sold by Evergrande and another embattled developer Kaisa Group Holdings Ltd.

Evergrande has done business with most of the 68 trust companies in China. It had US$1.8bil (RM7.6bil) in trust loans maturing in the fourth quarter, with another US$5bil (RM21bil) due over 2022 and 2023, according to Use Trust, a company that tracks the industry. — Bloomberg

The data only covers trusts sold to retail investors and not so-called single trusts, which are private placements and make up the bulk of Evergrande’s financing through the products.

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