Evergrande evades again by default; Debt in the real estate sector remains

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The company logo can be seen at the headquarters of the China Evergrande Group in Shenzhen, Guangdong Province, China, September 26, 2021. REUTERS / Aly Song

  • Bondholders Receive Overdue Coupon Payments – Source
  • Chinese real estate stocks, bonds are experiencing relief rally
  • Major liquidity concerns remain and further debts are due

SINGAPORE / HONG KONG, Nov 11 (Reuters) – Insolvent developer China Evergrande Group has again averted a destabilizing last-minute default. A source said Thursday that several bondholders received overdue coupon payments.

Evergrande (3333.HK), the world’s most heavily indebted developer, has stumbled from deadline to deadline in recent weeks as it struggled with more than $ 300 billion in debt, of which $ 19 billion Bonds are.

Chinese media agency Cailianshe reported that several bondholders received interest payments last month on the three bond tranches that were due in excess of $ 148 million last month. ,,

The payments were made at the end of a 30-day grace period that ended Wednesday, the third respite for the company in the past month. Two separate offshore coupon payments, due in late September and with grace periods ending in late October, were also paid with the dangerous deadline.

A default would have caused the company to formally default and have set aside provisions for other Evergrande dollar bonds, exacerbating the debt crisis in the world’s second largest economy.

“The short-term solution seems to be coming, but there is still a long way to go before this issue is resolved. These are the early days,” the source said, knowing the matter, referring to Evergrande and declining without permission will speak to the media.

Evergrande, at the center of a worsening $ 5 trillion liquidity squeeze in China’s real estate sector, did not respond to Reuters’ request to comment on its latest bond coupon payment.

Although the property developer was able to avoid a default again, the worries in the real estate sector did not abate with a debt wall that was due.

Evergrande has more than $ 255 million total coupon payments due on December 28th. It has come under pressure from its other domestic creditors and a stifling funding squeeze has overshadowed hundreds of its housing projects.

The focus of investors is now shifting to other developers with tight funds who have a number of offshore payments due in the short term, including the Kaisa Group (1638.HK).

Kaisa has the most offshore debt of any Chinese developer after Evergrande and asked for help from the creditors this week. It has over $ 59 million in total coupon payments due Thursday and Friday, with 30-day grace periods for both.

It was not immediately known whether Kaisa, the first Chinese real estate company to default on a foreign bond in 2015, paid the tranche due on Thursday. She has already missed payments on some home wealth management products.

The developer did not immediately respond to Reuters’ request for comment.

HARD LANDING

While the US Federal Reserve warned this week that China’s troubled real estate sector could pose global risks, there have been no clear signs that Beijing will step in with a broader, national plan to address the problem.

However, Chinese regulators have been trying in the past few weeks to reassure investors and homebuyers by saying the risks are manageable and excessive credit tightening by banks is being corrected.

Government regulators and think tanks have also held meetings with developers in the past few weeks, and the market is expecting some easing in credit and housing policies to prevent the sector from hard landing.

Those hopes and Evergrande’s payment sparked a rally in Chinese property stocks, with a property A-share index (.CSI000952) rising 9% and Hong Kong’s Hang Seng Mainland Properties Index (.HSMPI) closing 5.6% .

Evergrande’s shares closed 6.8% on a two-week high.

Chinese developer bond prices, which have been hit hard in recent weeks, rose even higher.

Duration Finance data showed that China Aoyuan Group’s 5.88% bond (3883.HK) rose more than 30% on that day on March 2027, although it remained at a highly troubled level of around 36 cents was traded in dollars.

Evergrande’s April 2022 notes rose 4% from midnight to 28.886 cents per dollar in the afternoon, a return of 620%, although they are still off the 30.289 earlier this week, according to Duration Finance data.

Developer bonds due in March 2024 traded at 24,839, up from 23,692 on Wednesday, data showed.

Bonds from Times China Holdings (1233.HK), Xinyuan Real Estate (XIN.N), Yuzhou Group Holdings (1628.HK), and Sunac China Holdings (1918.HK) also rose more than 10%.

A dollar-denominated Asian high-yield bond index (AHYG.SI) rose more than 1%, while Chinese high-yield corporate dollar (.MERACYC) spreads narrowed from record highs.

Developers like Evergrande and Kaisa have also tried to sell some of their business assets in China and elsewhere to raise cash in the face of rapidly growing repayment obligations.

British electric motor maker Saietta (SED.L) announced on Thursday that it is acquiring electric propulsion company e-Traction from Evergrande’s automotive division for up to € 2 million ($ 2.31 million). Continue reading

Edited by Sumeet Chatterjee, Lincoln Feast, and Carmel Crimmins

Our Standards: The Thomson Reuters Trust Principles.


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