Chinese real estate giant Evergrande has struck a deal to settle interest payments, calming fears the firm could default, sparking global financial chaos.
The crisis-hit company had debts of more than $300billion but it has negotiated an agreement with bondholders, while China's central bank has pumped more money into the banking system.
The indebted firm is heavily linked to China's broader economy and fears of contagion have kept global stock and bond markets on tenterhooks, similar to the Lehman Brothers collapse in 2008.
The announcement caused global markets to rally, with the FTSE 100 up 0.9 per cent and the Shanghai market up 0.4 per cent, although there remain doubts about the long-term health of the company.
Evergrande has admitted facing 'tremendous pressure' as it tackles its mammoth debt pile, and has warned that it may not be able to meet its liabilities.
Chinese real estate giant Evergrande has struck a deal to settle interest payments, calming fears the firm could default, sparking global financial chaos
Yet founder Xu Jiayin, a billionaire once counted as Asia's richest man, on Tuesday said the company will 'step out of the darkest moment soon'.
In a statement to the Shenzhen stock exchange, Evergrande's property unit Hengda said it had negotiated a plan to pay interest due on its 2025 bond, worth 232million yuan ($35.9million).
China's central bank also injected 90billion yuan ($14billion) into the banking system, in a sign of support as the country's financial markets reopened and steadied after a two-day break for the Mid-Autumn Festival.
Hengda said it would settle the coupon payment due Thursday on its Shenzhen-traded 5.8 per cent September 2025 bond, adding that the bond 'has already been resolved through private negotiations.'
It did not provide further detail and it was unclear whether the negotiations suggested any improvement to Evergrande's financial health or progress toward a restructure.
The company is due to pay 232million yuan ($36million) in interest on the bond by Thursday.
The announcement caused global markets to rally, with the FTSE 100 up 0.9 per cent (pictured)
Evergrande has made no mention of an $83.5million dollar bond interest payment also due on Thursday or $47.5million due next week.
Even if it misses the payment, the company would still have a 30-day grace period before it is deemed in default.
But Hengda's announcement seemed to stabilise broader market jitters and S&P 500 futures rose.
'We are still trying to understand what this payment means for the other bonds,' said a source familiar with the situation who declined to be identified as they are not authorised to speak to the media.
'But I imagine they would want to stabilise the market and make other coupon payments, given the close scrutiny.'
Analysts said Wednesday's repayment will go some way to soothing anxious markets in the short term.
But 'for confidence to return more meaningfully, it will need the market to see sight of the broad restructuring plans for Evergrande', Gary Dugan, chief executive officer at the Global CIO Office, told Bloomberg News.
Evergrande, which epitomised the
