Just days after Evergrande’s bonds hit new all time lows after “China’s Lehman” warned that the company with over $300 billion in debt and which many view as systematically important for China, the selloff accelerated further following news of a mini bank run as i) several key creditors demand immediate repayment and ii) as Evergrande bonds are no longer accepted as collateral.
As Bloomberg first reported last Friday, at least two of Evergrande’s largest non-bank creditors have demanded immediate repayment of some loans, adding a liquidity run to the growing insolvency strains at the world’s most indebted developer. The two creditors are trust companies which pool money from wealthy individual investors and have been a major source of “shadow” financing for Evergrande and other Chinese developers.
The trusts sent repayment notices to Evergrande over the past two months after becoming concerned about the property giant’s financial health. Trust loans often include terms that allow creditors to demand early repayment if certain conditions are met, such as sales targets, ratings downgrades or lawsuits. One of the trusts has so far received only a small portion of the money owed by Evergrande, Bloomberg reported. The size of the loans involved couldn’t immediately be learned.