Hong Kong: Developer China evergrande The group has made interest payments for an offshore bond before a grace period expires on Friday, two people with direct knowledge of the matter said, reducing a catastrophic default for the second time in a week.
Evergrande, once China’s best-selling developer, is grappling with more than $300 billion in liabilities, raising concerns about the impact of its fortunes on the world’s second-largest economy as well as global markets.
The property developer, which averted a default last week by securing $83.5 million for last-minute payments of interest on a bond, was required to make $47.5 million in coupon payments to bondholders by Friday.
Failure to pay by Friday’s deadline would have triggered a cross-default on all $19 billion worth of the company’s bonds in international capital markets, which would have been the world’s second-largest emerging market corporate debt default.
Evergrande did not respond to a Reuters request for comment. Due to the sensitivity of the matter, people refused to be identified.
Reuters was not able to determine the source of the funds used to make the interest payments. Bloomberg News reported earlier this week that Chinese officials had urged Evergrande’s founder, happened that means, to repay the developer’s debts from his personal assets.
Shares of Evergrande delivered early gains as of late Friday, with the Hang Seng index down 0.3%, down nearly 0.8%. The Hang Seng Mainland Properties index fell nearly 0.9%, while the mainland A-shares index of developers dropped 3.6%.
Data from Duration Finance showed developer’s bond prices rose more than 9% on Friday over its 11.5% January 2023 bond, and nearly 8% in its 12% January 2024 bond.
This still left them trading at a discount of more than 75% off their face value, with the 2023 bond holding around 190%.
One bondholder said he maintained a negative outlook for the developer despite making coupon payments.
“I think they are buying time at this point,” the bondholder said.
Evergrande missed coupon payments on its Dollar bonds on September 23, September 29 and October 11 for a total of $280 million, starting a 30-day grace period for each.
There’s still about $338 million in other offshore coupon payments coming in November and December.
The New York Times previously reported https://www.nytimes.com/live/2021/10/28/business/news-business-stock-mar ket that the developer hired a person who spoke on condition of anonymity. citing interest was paid. .
Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong, said: “Evergrande has tried its best to solve the liquidity problems, but it’s a bit difficult to collect enough capital to pay off all the debt.”
“I think there will be some negotiation between Evergrande and its lenders, so some sort of haircut is still possible. The market still needs some time to digest it and price it.”
debt crisis
Evergrande’s crisis has been looming for months and its dwindling resources against its vast liabilities have wiped out 80% of its value, prompting some analysts to consider it a default at some point.
Even as Evergrande secures funds to make payments, other Chinese developers whose fortunes have been hammered by market concerns over Evergrande’s debt crisis have slipped into formal default.
Fantasia Holdings Group Company Limited, Cynic Holdings (Group) Company Limited, China Properties Group Limited and modern land (China) Co., Ltd. has defaulted on dollar debt obligations this month.
Sources said other developers with significant dollar debt have proposed extension of maturity or debt restructuring of offshore bonds in meetings with regulators.
In a meeting with developers this week, China’s National Development and Reform Commission (NDRC) and the State Administration for Foreign Exchange asked developers facing large offshore debt maturities to evaluate repayment risk and report difficulties. said.
NDRC also urged developers to meet offshore debt obligations and maintain their reputation and market order.
“Selective defaults in the offshore market are vehemently not acceptable to authorities, and this week’s NDRC clarification should reassure offshore investors that they will be treated fairly as onshore investors,” said DBS Strategist wei liang chang Said in the client note.
Even developers who have not defaulted have seen their share and bond prices fall. On Friday, Chinese Estates Holdings Ltd said it would report a total loss of HK$1.36 billion in the current fiscal from the sale of all of its bonds issued by peer Casa Group Holdings Ltd.
Concerns over the systemic impact of the default by Evergrande have spread to record levels on Chinese high-yield dollar debt as investors demand higher risk premiums.
Investor concerns have also raised the cost of insurance against defaults on China’s sovereign debt. Earlier this month the cost touched its highest level since the height of the pandemic in 2020.
bank exposure
Established in Guangzhou in 1996, Evergrande embodies a free era of borrowing and manufacturing. But that business model has been decimated by hundreds of new regulations designed to curb the credit frenzy of developers and promote affordable housing.
Any prospect of Evergrande’s demise calls into question the fate of the more than 1,300 real estate projects that are underway in some 280 cities.
Bank exposure to developers is also extensive.
A leaked 2020 document, branded fake by Evergrande but taken seriously by analysts, extended the developer’s liabilities to over 128 banks and over 121 non-banking institutions.
Evergrande, once China’s best-selling developer, is grappling with more than $300 billion in liabilities, raising concerns about the impact of its fortunes on the world’s second-largest economy as well as global markets.
The property developer, which averted a default last week by securing $83.5 million for last-minute payments of interest on a bond, was required to make $47.5 million in coupon payments to bondholders by Friday.
Failure to pay by Friday’s deadline would have triggered a cross-default on all $19 billion worth of the company’s bonds in international capital markets, which would have been the world’s second-largest emerging market corporate debt default.
Evergrande did not respond to a Reuters request for comment. Due to the sensitivity of the matter, people refused to be identified.
Reuters was not able to determine the source of the funds used to make the interest payments. Bloomberg News reported earlier this week that Chinese officials had urged Evergrande’s founder, happened that means, to repay the developer’s debts from his personal assets.
Shares of Evergrande delivered early gains as of late Friday, with the Hang Seng index down 0.3%, down nearly 0.8%. The Hang Seng Mainland Properties index fell nearly 0.9%, while the mainland A-shares index of developers dropped 3.6%.
Data from Duration Finance showed developer’s bond prices rose more than 9% on Friday over its 11.5% January 2023 bond, and nearly 8% in its 12% January 2024 bond.
This still left them trading at a discount of more than 75% off their face value, with the 2023 bond holding around 190%.
One bondholder said he maintained a negative outlook for the developer despite making coupon payments.
“I think they are buying time at this point,” the bondholder said.
Evergrande missed coupon payments on its Dollar bonds on September 23, September 29 and October 11 for a total of $280 million, starting a 30-day grace period for each.
There’s still about $338 million in other offshore coupon payments coming in November and December.
The New York Times previously reported https://www.nytimes.com/live/2021/10/28/business/news-business-stock-mar ket that the developer hired a person who spoke on condition of anonymity. citing interest was paid. .
Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong, said: “Evergrande has tried its best to solve the liquidity problems, but it’s a bit difficult to collect enough capital to pay off all the debt.”
“I think there will be some negotiation between Evergrande and its lenders, so some sort of haircut is still possible. The market still needs some time to digest it and price it.”
debt crisis
Evergrande’s crisis has been looming for months and its dwindling resources against its vast liabilities have wiped out 80% of its value, prompting some analysts to consider it a default at some point.
Even as Evergrande secures funds to make payments, other Chinese developers whose fortunes have been hammered by market concerns over Evergrande’s debt crisis have slipped into formal default.
Fantasia Holdings Group Company Limited, Cynic Holdings (Group) Company Limited, China Properties Group Limited and modern land (China) Co., Ltd. has defaulted on dollar debt obligations this month.
Sources said other developers with significant dollar debt have proposed extension of maturity or debt restructuring of offshore bonds in meetings with regulators.
In a meeting with developers this week, China’s National Development and Reform Commission (NDRC) and the State Administration for Foreign Exchange asked developers facing large offshore debt maturities to evaluate repayment risk and report difficulties. said.
NDRC also urged developers to meet offshore debt obligations and maintain their reputation and market order.
“Selective defaults in the offshore market are vehemently not acceptable to authorities, and this week’s NDRC clarification should reassure offshore investors that they will be treated fairly as onshore investors,” said DBS Strategist wei liang chang Said in the client note.
Even developers who have not defaulted have seen their share and bond prices fall. On Friday, Chinese Estates Holdings Ltd said it would report a total loss of HK$1.36 billion in the current fiscal from the sale of all of its bonds issued by peer Casa Group Holdings Ltd.
Concerns over the systemic impact of the default by Evergrande have spread to record levels on Chinese high-yield dollar debt as investors demand higher risk premiums.
Investor concerns have also raised the cost of insurance against defaults on China’s sovereign debt. Earlier this month the cost touched its highest level since the height of the pandemic in 2020.
bank exposure
Established in Guangzhou in 1996, Evergrande embodies a free era of borrowing and manufacturing. But that business model has been decimated by hundreds of new regulations designed to curb the credit frenzy of developers and promote affordable housing.
Any prospect of Evergrande’s demise calls into question the fate of the more than 1,300 real estate projects that are underway in some 280 cities.
Bank exposure to developers is also extensive.
A leaked 2020 document, branded fake by Evergrande but taken seriously by analysts, extended the developer’s liabilities to over 128 banks and over 121 non-banking institutions.
.