China Evergrande to make crucial bond payment to avoid impending default – reports

China Evergrande to make crucial bond payment to avoid impending default – reports

Struggling real estate company China Evergrande Group found the money to pay an $ 83.5 million bond interest payment it missed in September, according to reports.

The company, which has approximately $ 305 billion in debt, has wired the payment of $ 83.5 million and noteholders will receive it before Saturday, China’s state-owned Securities Times newspaper reported on Friday, citing the affected channels, according to Bloomberg.

Reuters also reported that Evergrande deposited funds in a trust account Thursday evening before a 30-day grace period for the payment expired, citing a source.

A Hong Kong-based restructuring lawyer representing some bondholders told Reuters: “They seem to be avoiding default in the short term and it’s a bit of a relief that they’ve managed to find liquidity.

“But Evergrande still needs to restructure its debt. This payment could be a way for them to get some kind of buy-in with stakeholders before the big restructuring work. “

Evergrande, which is China’s second-largest real estate developer, raised alarm bells in global financial markets when it announced in September that it may not be able to pay its many creditors, ranging from homebuyers to contractors. under construction, through banks and foreign investors.

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

He then missed payments worth an additional $ 193 million on September 29 and October 11. They also gave a 30-day grace period for the payment.

The announcement this week that a deal to sell a 50.1% stake in its real estate services arm for $ 2.6 million had fallen amid growing fears of default. It also didn’t sell its Hong Kong headquarters for $ 1.7 billion.

A series of Chinese officials have sought to reassure investors in recent days, saying the interests of creditors will be protected. However, market participants expressed shock at the announcement of the payment.

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

The news would boost the confidence of bondholders, he said, because “there are many coupon payments due ahead. If Evergrande pays this time, I don’t see why he won’t pay next time ”.

Failure to pay interest for 30 days would result in 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, with its April 2022 and 2023 banknotes surging more than 10%, according to data provider Duration Finance.

Evergrande shares rose around 4%, a day after trading resumed after a suspension of more than two weeks pending the announcement of an abandoned sale of stake in its property management unit.

The mainland Hang Seng property index jumped more than 5% in early trading, compared to a 0.13% rise in the broader Hang Seng index.

On Wednesday, in an announcement about the failed asset sales, Evergrande gave a hint about the bond’s redemption. He pointed out that the group “has a 30-day grace period to pay interest after interest becomes due on its US dollar-denominated notes” and that the grace periods “have not expired.” .

However, in the same statement, he reiterated that he first admitted on the stock market in September that he was struggling under the weight of his enormous debt burden, brought on by the loss of sources of funding and a real estate market. which cooled rapidly.

“Given the difficulties, challenges and uncertainties associated with improving its liquidity, there can be no guarantee that the group will be able to meet its financial obligations under the financing documents and other contracts concerned,” the press release said.


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