China Evergrande Group bondholders are about to find out if the property giant’s liquidity crisis is as dire as it appears.

Interest payments on two Evergrande notes come due Thursday Sept 23, a key test of whether the developer will continue meeting obligations to bondholders even as it falls behind on payments to banks, suppliers and holders of onshore investment products. Investors are pricing in a high likelihood of default, with one of the notes trading at less than 30% of face value.

Concern over Evergrande’s ability to make good on US$300 billion of liabilities is spilling into China’s financial markets. Shares of other real estate firms have plunged, while the yield on an index of dollar-denominated junk bonds has climbed to about 14%, the highest in nearly a decade. The People’s Bank of China injected US$14 billion of short-term cash into the financial system on Friday in a sign policy makers want to soothe nerves.

The Evergrande payments due Thursday include US$83.5 million of interest on an 8.25%, five-year dollar bond, Bloomberg-compiled data show. There is a 30-day period before a missed payment is considered a default, according to the bond’s covenants. Evergrande needs to pay a 232 million yuan coupon on an onshore bond the same day.

In total, Evergrande has US$669 million in coupon payments coming due through the end of this year. Some US$615 million of that is on dollar bonds, Bloomberg-compiled data show. Fitch Ratings flagged the increased chance of a payment failure this month when it slashed the firm’s credit grade even deeper into junk territory, citing the risk of “probable” default.

Evergrande is also scheduled to pay interest on bank loans Monday Sept 20, with a one-day grace period. Monday, Sept 20 and Tuesday, Sept 21 are public holidays in China. While details on the amount due aren’t publicly available, Chinese authorities have already told major lenders not to expect repayment, people familiar with matter said last week. Evergrande and banks are discussing the possibility of extensions and rolling over some loans, the people said.

Bond investors are rushing to lock in professional help as a potential restructuring for Evergrande edges closer to reality. Addleshaw Goddard has engaged with some of the company’s bondholders and is preparing to establish a creditor committee to negotiate with Evergrande, according to a person familiar with the matter.

Evergrande’s debt pile includes about 571.8 billion yuan of borrowings from banks and other financial institutions such as trusts, with 240 billion yuan due in less than one year. The average borrowing cost stood at 9.02% as of June 30. A portion of Evergrande’s borrowings was secured by a pledge of its properties and equipment, land use rights, cash held at banks and the equity interests of certain subsidiaries.

China Minsheng Banking Corp., Agricultural Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. were among the developer’s principal banks at the end of last year.

Whether the selloff in Evergrande bonds drags down the broader credit market may depend on the company’s ability to buy time with banks. A messy default on loans could stoke fears of widespread contagion, something Xi Jinping’s government has been keen to avoid even as it tightens financing restrictions on overstretched developers and discourages government bailouts.

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