Evergrande set to miss second offshore bond coupon payment this month, sources say

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  • Some Evergrande bondholders did not receive a coupon on Wednesday
  • Evergrande faced Wednesday’s deadline for a $ 47.5 million payment
  • The company sold a $ 1.5 billion stake in Shengjing Bank
  • Evergrande shares increase by up to 17%

HONG KONG, Sept. 29 (Reuters) – At least some of China Evergrande’s offshore bondholders had not received a coupon due to close operations in Asia on Wednesday, sources said, although the developer was short of silver reached a $ 1.5 billion deal to pay off its debt. with a Chinese bank.

With liabilities of $ 305 billion, Evergrande has raised fears that its woes will spill over into the Chinese financial system and reverberate around the world – a concern that has subsided with the Chinese central bank pledging to protect investors. interests of home buyers.

The company, which has nearly $ 20 billion in offshore debt, was due to make a bond interest payment of $ 47.5 million on its March 2024 9.5% dollar bond on Wednesday. It also missed paying an $ 83.5 million coupon on another bond last Thursday.

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Two people familiar with the matter, who declined to be named due to the sensitivity of the matter, said at least some of the 2024 bond holders had not received any information from Evergrande. (3333.HK) on Wednesday payment.

It was not immediately clear whether payment could still be made during U.S. business hours.

A spokesperson for Evergrande did not immediately comment. Reuters was unable to determine whether Evergrande told any of the bondholders what he planned to do about Wednesday’s coupon payment.

Evergrande’s silence on its offshore payment obligations since the missed payment last week has left global investors wondering whether they will have to swallow significant losses at the end of the 30-day grace periods for coupons due on 23 and September 29.

The company, once the best-selling developer in China and now set to be one of the biggest restructurings ever in the country, has prioritized domestic creditors over offshore bondholders.

For Evergrande, “the most likely outcome is debt restructuring with government help,” Wai Hoong Leong, portfolio manager of the KraneShares Asia Pacific High Yield Bond ETF, said in a presentation to investors on Wednesday. “We expect the government and Evergrande to focus on protecting customers and suppliers, while ensuring orderly restructuring for creditors who are likely to have a greater impact.”

It missed a dollar bond payment deadline last Thursday, a day after its main real estate business in China said it had negotiated privately with onshore bondholders to settle a separate coupon payment on a denominated bond. in yuan.

In the latest such decision, Evergrande said in an exchange brief earlier Wednesday that he sell a 9.99 billion yuan ($ 1.5 billion) stake it owns in Shengjing Bank Co Ltd (2066.HK) to a government-owned asset management company.

The bank, one of Evergrande’s main lenders, demanded that all net proceeds from the sale be used to settle the developer’s debts with Shengjing. In the first half of last year, the bank had 7 billion yuan in loans to Evergrande, according to a report by brokerage firm CCB International, citing news reports.

A no-entry traffic sign can be found near the headquarters of the China Evergrande group in Shenzhen, Guangdong province, China on September 26, 2021. REUTERS / Aly Song

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This decision highlights the role that public companies can play in the outcome of Evergrande.

“We are currently in a wait-and-see phase. Creditors are organizing and people are trying to figure out how this falling knife could be caught,” said an adviser hired by one of Evergrande’s offshore bondholders.

“The time has started for a restructuring process. The business is going to have to do something, it is obviously struggling with liquidity… the liquidity problem is what brings down the house of cards.”

GOVERNMENT STEPS UP

Once the face of China’s frenzied construction boom, Evergrande has now become the child star of the developer debt crackdown that has spurred volatility in global markets and left investors large and small to sweat their exposure.

Evergrande’s problems slammed global stock markets earlier this month, although some global investors have since turned to political wrangling in Washington over the US debt ceiling and rising Treasury yields that have put stocks under pressure.

Nonetheless, any negative surprises from Evergrande could give stock bears more ammunition.

Rating agency Fitch on Wednesday downgraded the default ratings of long-term foreign currency issuers (IDRs) of Evergrande and its subsidiaries, Hengda and Tianji, citing the likely non-payment of offshore bond interest last week.

Bloomberg reported On Wednesday, Marathon Asset Management buys debt issued by Evergrande Group, citing the co-founder and CEO of the investment firm, Bruce Richards.

Beijing encourages public enterprises and state-backed real estate developers such as China Vanke Co Ltd (000002.SZ) To buy part of Evergrande’s assetspeople familiar with the matter told Reuters.

Authorities hope the asset purchases will prevent or at least ease social unrest that could arise if Evergrande were to suffer a disorderly collapse, they said, declining to be identified due to the sensitivity of the matter.

Monday, the central bank of China is committed to protecting consumers exposed to the housing market, not to mention Evergrande in a statement posted on its website, and injected more liquidity into the banking system.

These movements have boosted investor sentiment vis-à-vis Chinese real estate stocks over the past two days, with Evergrande stock rising 17% on Wednesday before closing up 15%.

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Reporting by Anshuman Daga, Andrew Galbraith, Tom Arnold, Clare Jim, Karin Strohecker, Donny Kwok and Ira Iosebashvili Writing by Sumeet Chatterjee Editing by Kirsten Donovan and Matthew Lewis

Our standards: Thomson Reuters Trust Principles.

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