Evergrande's lenders weigh loan losses, rolling over credit: sources

Beijing

ONE of China Evergrande Group's main lenders has made provisions for losses on a portion of its loans to the embattled property developer, while some creditors are planning to give it more time to repay, four bank executives told Reuters.

The Chinese banks' measures, reported for the first time, show how financial institutions in the world's second-largest economy are bracing for a possible collapse of Evergrande.

The developer epitomised China's freewheeling era of borrowing and building, with nearly US$305 billion in liabilities across loans, bonds, so-called trust products and money owed to contractors and suppliers, among others.

Agricultural Bank of China (AgBank), the country's No 3 lender by assets, has made some loan loss provisions for part of its exposure to Evergrande, one of the executives said, without giving details.

Meanwhile, China Minsheng Banking and China Citic Bank, two other major Evergrande lenders, are prepared to roll over some of their near-term debt obligations, two separate sources with knowledge of each situation said.

AgBank, Minsheng, Citic and Evergrande did not immediately respond to e-mailed requests for comment.

In general, Chinese banks' exposure to Evergrande has fallen in the past year, and most of their outstanding loans are collateralised or guaranteed by deposits, according to the four sources. All the sources declined to be named as they are not allowed to discuss individual clients.

Minsheng, for example, has cut its loan exposure to Evergrande to 30 billion yuan (S$6.27 billion) from 40 billion yuan over the past 12 months, one of the sources said, adding it also stopped offering new loans to Evergrande in recent months.

Evergrande is due to pay US$83.5 million of interest on Sept 23 for its offshore March 2022 bond. It has another US$47.5 million interest payment due on Sept 29 for March 2024 notes. The bonds would default if Evergrande fails to pay the interest within 30 days.

Regulators have not given any indication to Chinese lenders of a possible bailout of Evergrande, said a source at one of the main trust creditors.

The editor-in-chief of the Chinese Communist Party-backed tabloid Global Times on Friday warned Evergrande that it should not bet on a government bailout on the assumption it is "too big to fail".

It is possible the government may step in to manage an orderly collapse of Evergrande, said two banking sources familiar with the matter. REUTERS

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