A teetering Chinese real estate developer unexpectedly struck an 11th-hour deal to pay some of what it owes to its domestic investors on Wednesday, but foreign investors still owed millions of U.S. dollars on Thursday have so far been left hanging.

Investors around the world have been watching property developer Evergrande Group closely this week, as the company is in danger of defaulting under its crushing debt load.

The company owes more than $300 billion US to various creditors and was struggling to meet a Thursday deadline to make payments on two of its many bonds. One payment denominated in U.S. dollars is for roughly $84 million. The other is for 232 million yuan — about $36 million US.

Evergrande surprised markets by announcing it had struck a deal with holders of its yuan bond, the vast majority of which is held by domestic investors since it is denominated in China’s currency, the yuan.

The payment agreement has been “settled in negotiations outside the market,” the company said, providing no detail about whether or not the payment was made in full.

Whatever the deal was, it likely came as a pleasant surprise to holders of that debt, who were in danger of getting nothing. The company’s silence about the fate of the other U.S.-dollar denominated debt has foreign investors even more anxious.

Evergrande appears to be trying to buy time for “an orderly default rather than a shocking implosion” by paying bondholders in China on time while skipping payments abroad, Vishnu Varathan of Mizuho Bank said in a report.

“Averting a default altogether is highly unlikely,” Varathan said.

The company seems to be favouring Chinese creditors in order to negotiate with a circle of friendly banks and other institutions that hold its debt, he said, noting that “optimizes relief from creditor action” in China.

China’s main stock market benchmark, the Shanghai Composite Index, closed 0.4 per cent higher following the announcement. Hong Kong financial markets, which have been jolted by Evergrande’s predicament, were closed for a holiday.

If Chinese regulators get involved, they are likely to focus on protecting families who paid for apartments that are yet to be built. Getting ordinary people to bear the brunt of the losses would be the most painful scenario for China’s economy, which is why most observers think that’s the least likely outcome.

Jia Wang, interim director of the China Institute at the University of Alberta, says Beijing will do whatever it takes to avoid the worst-case scenario of just toppling over into bankruptcy because of what she calls “the ripple effect,” both in China and abroad. “It is a large company employing so many people and involved in so many projects,” she said.

WATCH | How Evergrande could rattle global markets

Jia Wang, Director of the China Institute at the University of Alberta, explains why Evergrande is a big risk for China’s entire housing market and broader economy. 0:54

“There’s going to be a lot of very unhappy investors, from banks to individual investors or to those who prepaid for their apartment yet to be built,” she said in an interview with CBC News.

Troubling Lehman comparisons

Some commentators suggest Evergrande might become China’s “Lehman moment,” referring to the failure of Wall Street bank Lehman Brothers, a forerunner to the 2008 global financial crisis. But economists say the risk of Evergrande’s problems cascading into other parts of the global economy is low.

That’s because while the company is the most indebted real estate company in the world, the vast majority of it is held inside China. Estimates of how much of the company’s debt is owned by foreign investors range from between $14 billion and $19 billion US.

At least one analyst suggested that the yuan payment could augur good news for those owed dollars as well.

“Evergrande’s last-minute deal with bondholders to repay interest due Thursday on domestic notes suggests it could conceivably avoid defaulting this week,” Bloomberg Intelligence analyst Daniel Fan said. “It’s still unclear how it will handle $83.5 million of interest due on offshore bonds on Thursday, but the onshore deal might be a template for an offshore agreement that lets the firm, with government oversight, continue selling assets to try to work through liquidity problems.”

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