DOMESTIC banks have extended Evergrande Real Estate Group a 100 billion yuan (US$16 billion) credit lifeline, as a slump in China’s key property sector pressure one of the biggest and most indebted developers.

    Evergrande, China’s fourth-largest property firm by sales, said the credit lines had been extended by four major State-owned banks since February.

    The statement, issued Tuesday, helped Evergrande’s bonds recover on from an up to 3 point fall triggered by unconfirmed social media remarks that it was facing payment difficulties. The bonds opened unchanged yesterday.

    Standard & Poors analyst Vincent Lam, however, said the credit lines were not legally binding, adding to investors’ concerns about the company and a sector that accounts for some 15 percent of China’s gross domestic product, and which has been slowing along with the economy.

    “We don’t know if the proceeds from additional debt went into non-property investments, which is why bond investors are sceptical,” said Yin Chin Cheong, analyst at research firm CreditSights. “For creditors it will remain a point of concern unless these investments contribute to improved cash flows.”

    Evergrande said the credit lines show support from banks but declined to give details on how it plans to use the financing.

    Official data yesterday showed average new home prices in China fell at the fastest pace on record in February, after weakening for several months. Evergrande’s main markets are in third and fourth-tier cities, which have seen some of the biggest drops.

    The company’s debt to equity ratio stands at 167 percent, above the sector’s average of 107 percent, Thomson Reuters data show. It will take 4.6 years to pay off debt at current cash generation rates compared to its peers’ average of 3.7 years. (SD-Agencies)