Wednesday, December 1

Evergrande Avoids Interest Failure: Reports | Evergrande

Chinese property developer Evergrande reportedly made an interest payment on an offshore bond before a grace period expired on Friday, narrowly avoiding a catastrophic default for the second time in a week.

Evergrande, once China’s best-selling developer, teeters below $ 300 billion in liabilities, fueling concerns about its destination’s impact on the world’s second-largest economy, as well as global markets. . It avoided a default last week by securing $ 83.5 million for last-minute interest payments on a bond, and needed to make $ 47.5 million in coupon payments to bondholders by Friday.

On Friday, Reuters, Bloomberg and the New York Times said sources with direct knowledge of the matter had confirmed the payment. Evergrande did not respond to Reuters request for comment.

Failure to pay before Friday’s deadline would have caused cross-defaults on all of the company’s $ 19 billion of bonds in the international capital markets, in what would have been the second emerging market corporate debt default. biggest in the world.

Reuters was unable to determine the source of the funds used to make the interest payments. Bloomberg News reported earlier this week that Chinese authorities had urged Evergrande founder Hui Ka Yan to pay off the developer’s debts from his personal estate.

Evergrande shares gave up their initial gains to fall about 0.8% late Friday morning, versus a 0.3% drop in the Hang Seng index. The Hang Seng mainland property index fell about 0.9%, while an A-share index of mainland developers fell 3.6%.

Evergrande's Unfinished Taicang Theme Park
Evergrande’s unfinished Taicang theme park. Photograph: Aly Song / Reuters

The developer’s bond prices rose the most on Friday, with its January 2023 bond of 11.5% rising more than 9%, and its January 2024 bond of 12% up nearly 8% on the day, they showed. Duration Finance data.

That still left them trading at discounts of more than 75% of their face value, with the 2023 bond yielding nearly 190%.

One bondholder said he held a negative outlook for the developer despite the coupon payment being made.

“I just think they are buying time right now,” the bondholder said.

Evergrande defaulted on coupon payments totaling nearly $ 280 million on its dollar bonds on September 23 and 29 and October 11, beginning 30-day grace periods for each.

It still has nearly $ 338 million in other overseas coupon payments due in November and December.

The New York Times before reported that the developer made an interest payment, citing one person who spoke on condition of anonymity.

“Evergrande has done its best to resolve liquidity problems, but it is a bit difficult to raise enough capital to pay off all debt,” said Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong.

“I think there [will] It will be some negotiations between Evergrande and its lenders, so some type of haircut is still possible. The market still needs some time to digest and appreciate this. “

Evergrande’s problems have multiplied for months, and its dwindling resources in the face of its huge liabilities have wiped out 80% of its value, leading some analysts to believe that default at some point is inevitable.

Even as Evergrande raises funds to make payments, other Chinese developers whose fortunes have been affected by market concerns over the Evergrande debt crisis have slipped into formal default.

Fantasia Holdings Group Co Ltd, Sinic Holdings (Group) Co Ltd, China Properties Group Ltd and Modern Land (China) Co Ltd have defaulted on their dollar debt obligations this month.

Other developers with significant dollar debt have proposed extending the maturities of overseas bonds or undertaking a debt restructuring in a meeting with regulators, the sources said.

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