Wednesday, August 10

China Evergrande to Make Crucial Bond Payment to Avoid Impending Default: Reports | Evergrande

Troubled real estate company China Evergrande Group has obtained the money to pay an interest payment on bonds of $ 83.5 million that fell short in September, according to reports.

The company, which has debts of around $ 305 billion, transferred the payment of $ 83.5 million and note holders will receive it before Saturday, the Chinese state newspaper Securities Times said on Friday, citing relevant channels, according to Bloomberg. .

Reuters also reported that Evergrande had deposited funds into a trust account on Thursday night before the expiration of a 30-day grace period for payment, citing a source.

A Hong Kong-based restructuring lawyer representing some bondholders told Reuters: “It appears that they are avoiding short-term default and it is a relief that they have managed to find liquidity.

But still, Evergrande needs to restructure its debt. This payment could be a way to get some kind of buy-in from stakeholders before the hard work required in restructuring. “

Evergrande, which is China’s second-largest real estate developer, set off the alarm in global financial markets when it announced in September that it may not be able to pay its many creditors, from home buyers, building accountants, banks and offshore investors.

He missed the $ 83.5 million bond payment on September 23, but had a 30-day grace period to get the money.

It then failed to make payments of another $ 193 million on September 29 and October 11. They also allowed a 30-day grace period for payment.

An announcement this week that a deal to sell a 50.1% stake in its real estate services arm for $ 2.6 million had collapsed on heightened concerns that it could default. Nor did it sell its Hong Kong headquarters for $ 1.7 billion.

A number of Chinese officials in recent days have tried to reassure investors, saying that the interests of creditors would be protected. However, market participants expressed shock at the news of the payment.

“This is a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management, adding that many expected a default.

The news would boost bondholder confidence, he said, as “there are a lot of coupon payments due ahead. If Evergrande pays this time, I don’t see why it won’t pay next time. “

Failure to pay interest for 30 days would result in a formal default by the company and trigger cross-default provisions for other Evergrande dollar bonds.

Evergrande’s dollar bonds rose in value on Friday morning, and its April 2022 and 2023 notes were up more than 10%, according to data provider Duration Finance.

Evergrande shares rose about 4%, a day after resuming operations after a suspension of more than two weeks pending the announcement of an eliminated stake sale in its property management unit.

The Hang Seng Mainland Property Index rose more than 5% in early trading, versus a 0.13% rise in the broader Hang Seng Index.

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