Evergrande dodges the fault again; real estate debt concerns persist



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

  • Bondholders receive past due coupon payments – source
  • Chinese real estate stocks and bonds stage a rally of relief
  • Wider liquidity issues remain, more debts fall due

SINGAPORE / HONG KONG, Nov. 11 (Reuters) – Cash-strapped developer China Evergrande Group once again avoided a destabilizing default at the last minute, a source saying on Thursday that several bondholders had received payments from late coupons.

The world’s most leveraged developer Evergrande (3333.HK) has stumbled from maturity to maturity in recent weeks as it grapples with more than $ 300 billion in liabilities, including $ 19 billion in dollar bonds. .

Chinese media outlet Cailianshe reported that several bondholders had received interest payments on the three bond tranches which had a total of more than $ 148 million owed last month. ,,

The payments were made at the end of a 30-day grace period that ended Wednesday and was the company’s third stay in the past month. Two separate offshore coupon payments that were due at the end of September and for which the grace periods ended at the end of October were also paid with a dangerously close deadline.

A default would have resulted in a formal default by the company and triggered cross-default provisions for other Evergrande dollar bonds, exacerbating a debt crisis that threatens the world’s second-largest economy.

“The short-term fix appears to be happening, but there is still a long way to go before this issue is resolved. These are the early days,” said the source with knowledge of the matter, referring to Evergrande and declining to be appointed without authorization. talk to the media.

Evergrande, which is at the center of a growing liquidity crisis in China’s $ 5,000 billion real estate sector, did not respond to Reuters’ request for comment on its latest bond coupon payment.

Although the developer managed to avoid a default again, the difficulties in the real estate sector have shown no signs of abating with a wall of debt coming due.

Evergrande has coupon payments totaling over $ 255 million due on December 28. He has come under pressure from his other creditors in his country and a stifling funding restriction has cast a shadow over hundreds of his residential projects.

Investor attention is now also shifting to other cash-strapped developers who have a series of offshore payments coming up in the short term, including Kaisa Group (1638.HK).

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

It was not immediately clear whether Kaisa, which became the first Chinese real estate company to default on a foreign bond in 2015, made the payment of the installment due on Thursday. He has already missed payments on some home wealth management products.

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

DIFFICULT LANDING

While the U.S. Federal Reserve warned this week that China’s struggling real estate sector could pose global risks, there is no clear indication whether Beijing will step in with a broader national plan to tackle the problem.

Chinese regulators have, however, sought in recent weeks to reassure investors and homebuyers, saying the risks were manageable and that excessive credit crunch by banks was being corrected.

Regulators and government think tanks have also held meetings with developers in recent weeks, and the market expects some easing in credit and housing policies to prevent a hard landing for the sector.

These hopes and the payment of Evergrande sparked a rally of relief among Chinese real estate stocks, with an A real estate stock index (.CSI000952) up 9%, and the Hang Seng Mainland Properties index of Hong Kong (. HSMPI) closing up 5.6%.

Evergrande shares closed up 6.8% to a two-week high.

Chinese developer bond prices, which have been hit hard in recent weeks, have risen further.

Data from Duration Finance showed that the price of the China Aoyuan group bond (3883.HK) at 5.88% from March 2027 jumped more than 30% on the day, although it continued to rise. trade at deeply distressed levels of around 36 cents to the dollar.

Evergrande’s April 2022 banknotes jumped 4% from midnight to 28.886 cents on the dollar in the afternoon, yielding 620%, although they are still down from 30.289 earlier this week, according to Duration Finance data.

The developer bond due March 2024 was trading at 24.839, up from 23.692 on Wednesday, the data showed.

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

An Asian dollar-denominated high yield bond index (AHYG.SI) rose more than 1%, while Chinese high yield corporate interest rate spreads (.MERACYC) narrowed relative to record highs.

Developers like Evergrande and Kaisa have also sought to sell some of their business assets in China and elsewhere to raise funds amid rapidly growing redemption obligations.

British electric motor maker Saietta (SED.L) said on Thursday it was buying electric powertrain company e-Traction from the Evergrande automotive unit for up to € 2 million (2.31 million euros). millions of dollars). Read more

Editing by Sumeet Chatterjee, Lincoln Feast and Carmel Crimmins

Our standards: Thomson Reuters Trust Principles.


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