China Evergrande misses second payment | Magnet
China Evergrande Group has failed to pay bond interest owed, its second unpaid offshore debt payment in a week, despite the cash-strapped company scrambling to meet its obligations in its home market.
The company, weighed down by $ 305 billion (A $ 423 billion) in debt, was due on Wednesday to make a bond interest payment of $ 47.5 million (A $ 65.9 million) on its 9.5% dollar bond from March 2024, after missing $ 83.5 million (A $ 115.9 million) in coupon payments last Thursday.
With liabilities equal to 2% of Chinese GDP, Evergrande has raised fears that its woes will spill over into the financial system and reverberate around the world, although concerns subsided somewhat after the central bank committed. to protect the interests of home buyers.
The developer’s silence on its offshore payment obligations, however, left global investors wondering whether they will have to take significant losses at the end of the 30-day grace periods for the coupons that were due on September 23 and 29.
Some Evergrande offshore bondholders had not received any interest payments or communications by the end of Wednesday New York time, said people familiar with the matter, who declined to be identified due to the sensitivity of the problem.
A spokesperson for Evergrande did not immediately comment. Reuters has not been able to determine whether Evergrande has told bondholders what it plans to do regarding the coupon payment due Wednesday.
The two missed offshore payments come as the company, which has nearly $ 20 billion (AU $ 28 billion) in offshore debt, faces deadlines for dollar bond coupon payments totaling $ 162.38 million. (A $ 225.31 million) next month.
Once the best-selling developer in China, Evergrande is now set to be one of the largest restructuring ever in the country. He has prioritized his onshore responsibilities amid concerns about his issues sparking social unrest.
“I don’t see a lot of willingness to give a fairer result to offshore bondholders rather than onshore banks, let alone homebuyers and people who have lent onshore through personal loan structures,” said Alexander Aitken, partner at Herbert Smith Freehills. in Hong Kong.
“Of course, legally there is also structural subordination abroad, which means that the lenders of Evergrande’s onshore subsidiaries are paid before the lenders of the parent company or any offshore debt issuer.”
Beijing is unlikely to intervene directly to resolve the Evergrande crisis in the form of a bailout, but analysts say it is wary of a disorderly collapse that could fuel unrest among investors, suppliers and buyers local.
In recent days, authorities have urged public companies and state-backed property developers to buy certain Evergrande assets in order to reduce those risks.
Some instant messaging groups used by people who owed Evergrande money to stage protests and discuss claims have been blocked on Tencent Holdings’ WeChat platform, members of the group said on Wednesday.
Evergrande said on Wednesday it would sell a 9.99 billion yuan (AU $ 2.1 billion) stake it owns in Shengjing Bank Co Ltd to a state-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, who had seven billion yuan (AU $ 1.5 billion) of loans to Evergrande in the first half of last year.
Separately, Evergrande’s Pearl River Delta company said in a WeChat post on Tuesday that nearly 20 developments in the region have resumed construction. The post showed construction photos from various sites and said the resumption of work had accelerated since Evergrande pledged earlier this month to deliver the homes to buyers.
Its main onshore unit Hengda Real Estate Group announced the resolution of an onshore bond coupon payment on September 23 through “private negotiations”.
Evergrande shares opened sharply higher on Thursday, rising to 5.21% before turning the tide to collapse to 7.17%. The stock lost five percent in afternoon trading.
“Regardless of how the debt is restructured, Evergrande shareholders and investors in USD-denominated offshore corporate bonds will suffer significant losses,” said Jing Sima, chief China strategist at BCA Research in a note.
Associated Australian Press