China Evergrande Makes Outstanding Interest Payment on Dollar Bonds, State Media Says – .

China Evergrande Makes Outstanding Interest Payment on Dollar Bonds, State Media Says – .

made an overdue interest payment to holders of international bonds, the state-owned Securities Times reported on Friday in an unexpected move that allows the real estate company to avoid default.

The Chinese real estate developer on Thursday sent $ 83.5 million to the dollar bond trustee, and that financial institution will in turn pay bondholders, the Securities Times reported. The financial newspaper is run by the Communist Party’s flagship newspaper, the People’s Daily.

Evergrande was nearing the end of a 30-day grace period before bondholders could send a notice of default to the company after failing to pay interest on roughly $ 2.03 billion in dollar bonds September 23.
A default on these bonds would likely have escalated into the largest corporate default in Asia, allowing creditors to declare defaults on some of Evergrande’s other debts. The company is one of China’s largest developers and the most in debt. It had the equivalent of more than $ 300 billion in total liabilities, including some $ 89 billion in interest-bearing debt, at the end of June.

Many international bondholders expected Evergrande not to make its dollar bond payments before the end of the grace period. The company has also ignored other coupon payments in recent weeks and has outstanding dollar debt with a total face value of around $ 20 billion. Advisors to international bondholders said this month that they had made little progress in their efforts to engage with Evergrande.

On Wednesday, however, the Shenzhen-based group said in a regulatory filing that it “will do its best to negotiate the renewal or extension of its loans or other alternative arrangements with its creditors.”

Evergrande attempted to raise funds by disposing of assets such as stakes in subsidiaries and a Hong Kong office building that he owns. Last month, he agreed to sell most of his stake in a Chinese commercial bank to a state-owned company for the equivalent of $ 1.55 billion. The company had also planned to sell a controlling stake in its property management unit for the equivalent of around $ 2.6 billion to a smaller rival, but said this week it had ended the deal.

Hong Kong-listed Evergrande stock has collapsed by more than 80% this year and its dollar bonds are trading well below face value, indicating investor skepticism about their full redemption. Shares rose 5% early in trading on Friday, while its bonds were still at deeply distressed levels, indicating investors still expect the company to default in the end.

A $ 4.7 billion, 8.75% Evergrande bond due 2025 was listed at just 21.75 cents to the dollar Friday morning in Hong Kong, according to Tradeweb, compared to 20.5 cents Thursday night.

The developer is the most high-profile victim of a campaign by Chinese authorities to tame the housing market, in part by cracking down on excessive corporate borrowing through limits on bank lending and restrictions on the effect of developer leverage, known as the “three red lines.”

But the industry as a whole has racked up huge debts – more than $ 5,000 billion, including funds raised from homebuyers through pre-sales of still unfinished apartments, according to economists at Nomura – and is under pressure. new regime.

Contract sales, which reflect new contracts signed with home buyers, at many developers fell more than 20% or 30% year-over-year in September, and official government statistics show that Nationwide new home prices edged down last month for the first time since 2015.

Evergrande’s own contract sales plunged even further; the developer said this week that its contract sales “for the month of September 2021 and to date” totaled the equivalent of just $ 572 million, well below the $ 28.5 billion in contract sales it ‘he declared during the full two months of September and October 2020.

Several smaller developers, such as Fantasia Holdings Group Co., have recently defaulted on debts or have asked investors to wait longer for repayment, and many developers’ bond prices are trading at deeply distressed levels. .

China Evergrande Group: Block construction, massive debts

Write to Elaine Yu at [email protected] and Quentin Webb at [email protected]

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