Asia’s richest banker, Uday Suresh Kotak, has opined that troubles at debt-laden Chinese real estate giant Evergrande appear to be the communist nation’s Lehman Brothers moment.
The Evergrande mayhem also brings to mind India’s Infrastructure Leasing and Financial Services (IL&FS) crisis, Kotak said on Twitter on Tuesday.
Kotak, chairman of Mumbai-headquartered Kotak Mahindra Bank, tweeted: “Evergrande seems like China’s Lehman moment. Reminds us of IL&FS.”
He went on to say that with IL&FS, “The Indian government acted swiftly. Provided calm to financial markets. The government appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading ~ 25 cents to a $.”
Evergrande’s debt pile dwarfs the annual gross domestic product (GDP) of several nations, including Sri Lanka, Luxembourg and Croatia.
While most people don’t expect Evergrande to “collapse all of a sudden, the silence and a lack of major actions from policy makers is making everyone panic”, Standard Chartered’s chief economist for Greater China and North Asia, Ding Shuang, told Bloomberg. Shuang told the news agency that he expects the Chinese administration “to at least offer some verbal support soon to stabilise sentiment”.
Meanwhile, ratings agency S&P Global has called the property developer’s default a “virtual certainty”, while Bloomberg has reported that officials in Beijing warned domestic financial firms not to expect interest payments due from Evergrande.
Uday Kotak heads a team of experts trying to get infrastructure developer IL&FS to repay its creditors. Money owed by the company to financial creditors amounts to INR1trn ($13.6bn), including non-fund-based exposure.
As of 15 April, “We have broadly addressed about INR430bn, which is roughly about 43%-44% of the total debt,” Kotak, who serves as IL&FS’s non-executive chairman, told reporters while sharing a quarterly update on the ongoing resolution process.
The layered structure of the IL&FS group is a challenge and the board will have to continue “unpeeling the onion”, Kotak was quoted as saying in a Press Trust of India report.
The Indian regime asked Kotak to head the IL&FS’s board in 2018, after the lender collapsed in the wake of a liquidity crunch.