In just a few years, Evergrande Real Estate Group (ticker: 3333.HK) has grown from a mid-sized, regional property company into one of China’s largest developers. Its extraordinary growth has been mainly debt-financed. Evergrande is highly leveraged with large borrowings and other liabilities balanced on a small sliver of equity: total debt is now over four times shareholders’ equity. It is reliant on its lenders continuing to roll over short-term borrowings. With interest payments spiralling out of control and cash profits likely to be negative this year, the company may already have reached a tipping point where interest can only be paid out of more debt. Moreover, its liabilities probably exceed the value of its assets. In my view, there is a strong possibility that Evergrande is insolvent.