Evergrande Set to Miss Second Offshore Bond Coupon Payment This Month, Sources Say | Money

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A man walks past the China Evergrande Center building in Hong Kong on September 23, 2021. – AFP Photo

HONG KONG, September 30 – At least some of China Evergrande’s offshore bondholders did not receive the coupon payment due at the close of operations in Asia yesterday, sources said, although the developer was running out of money. Argent reached a $ 1.5 billion (RM 6.27 billion) deal to settle a debt with a Chinese bank.

With a liability 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 was assuaged with the Chinese central bank’s promise to protect investors. interests of home buyers.

The company, which has nearly $ 20 billion in offshore debt, was due to make a $ 47.5 million bond interest payment yesterday on its 9.5% dollar bond from March 2024. It also defaulted on pay a coupon of 83.5 million US dollars on another bond last Thursday.

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 did not receive any information from Evergrande about the payment yesterday.

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 could not 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 large losses at the end of the 30-day grace periods for coupons due on 23 December. and September 29.

The company, once the best-selling developer in China and is 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 a debt restructuring with government help,” Wai Hoong Leong, portfolio manager of the KraneShares Asia Pacific High Yield Bond ETF, said in an investor presentation yesterday. “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 of those moves, Evergrande said in an exchange brief Wednesday that it would sell a 9.99 billion yuan ($ 1.5 billion) stake it owns in Shengjing Bank Co Ltd to a company management of state-owned assets.

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.

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

“We are currently in the waiting 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 to turn for a restructuring process. The company is going to have to do something, it is obviously struggling with liquidity… the liquidity problem is what brings down the house of cards.

Push the government

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 hit global stock markets earlier this month, although some global investors have since focused on political wrangling in Washington over the US debt ceiling and rising Treasury yields. which put the actions under pressure.

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

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

Bloomberg announced yesterday that Marathon Asset Management is buying debt securities issued by Evergrande Group, citing the co-founder and CEO of the investment firm, Bruce Richards.

Beijing is pushing state-owned companies and state-backed real estate developers, such as China Vanke Co Ltd, to buy some of Evergrande’s assets, people with knowledge of the matter told Reuters.

Authorities hope the asset purchases will avoid or at least alleviate 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.

On Monday, China’s central bank pledged to protect consumers exposed to the real estate market, without mentioning Evergrande in a statement posted on its website, and pumped more money into the banking system.

The moves boosted investor sentiment towards Chinese real estate stocks over the past two days, with Evergrande stock rising 17% yesterday before closing 15% higher. Reuters


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