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China’s Evergrande Debt Crisis: Sizing Up a Big Mess

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China Evergrande Group


EGRNF -6.10%

last month missed a scheduled interest payment to overseas bondholders, raising the prospect that October could bring one of the largest defaults in years.

Investors have been grappling with unknowns including what the Chinese government might do in response. Beijing has signaled it is preparing to cushion the blow to national interests. That could include potential aid to Chinese investors, banks, Evergrande’s suppliers and home buyers who committed financially to homes that have yet to be completed.

Evergrande and the real-estate sector in general are important cogs in China’s economy, and the overheated housing market was already showing signs of a downturn. At the same time, few analysts expect good news for the foreign owners of the company’s dollar bonds.

Evergrande last month said it had…

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