HONG KONG / SHANGHAI, Oct.22 (Reuters) – China Evergrande Group (3333.HK) transferred funds to a trust account on Thursday for a dollar bond interest payment due on Sept. 23, a source told Reuters on Friday. , a few days before a deadline that would have plunged the besieged developer into a formal default.
The source corroborated a report in the state-backed Securities Times on Friday that the company made $ 83.5 million in coupon payments into a trust account at Citibank on Thursday, allowing it to pay everyone. bond holders before the end of the grace period on October 10. 23.
“They seem to be avoiding a short-term default and it’s a bit of a relief that they’ve managed to find liquidity,” said a Hong Kong-based restructuring lawyer representing some bondholders.
“But still, Evergrande 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 did not immediately respond to Reuters’ request for comment. Citi declined to comment.
The news of the wire payment comes a day after financial information provider REDD reported on Thursday that the company had been granted more time to pay off an overdue bond issued by Jumbo Fortune Enterprises and guaranteed by Evergrande. Read more
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. Read more
“It’s a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management Ltd, adding that many expected a default.
The news would boost the confidence of bondholders, he said, because “there are many coupon payments to come. If Evergrande pays this time, I don’t see why he won’t pay next time ”.
Evergrande missed two coupon payments on its dollar bonds on September 23 and 29, starting the 30-day grace period for the payment. 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 surged 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 being suspended for more than two weeks pending news of a sale of a discontinued stake in its property management unit.
The Hang Seng Mainland Property Index (.HSMPI) jumped more than 5% in early trading, compared to a 0.13% rise in the larger Hang Seng Index. (.HSI)
Reporting by Clare Jim and Anshuman Daga in Hong Kong, Samuel Shen and Andrew Galbraith in Shanghai; Editing by Shri Navaratnam and Christopher Cushing
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