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China Evergrande will make crucial bond payment to avert looming default – reports | Evergrande

The troubled property company China Evergrande Group has come up with the money to pay a $83.5m bond interest payment that it missed in September, according to reports.

The company, which has debts of around $305bn, wired the $83.5m payment and noteholders will receive it before Saturday, China’s state-backed newspaper Securities Times said on Friday, citing relevant channels, according to Bloomberg.

Reuters also reported that Evergrande had deposited funds to a trustee account on Thursday night before the expiration of a 30-day grace period for the payment, citing a source.

A Hong Kong-based restructuring lawyer representing some bondholders told Reuters: “They seem to be avoiding short-term default and it’s a bit of a relief that they have managed to find liquidity.

“But still, Evergrande does need to restructure its debt. This payment might be a way for them to get some sort of buy-in with stakeholders before the heavy work needed on the restructuring.”

Evergrande, which is China’s second-biggest property developer, sparked alarm on global financial markets when it announced in September that it might not be able to pay its many creditors ranging from homebuyers, building contarctors, banks and offshore investors.

It missed the $83.5m bond repayment on 23 September but had a 30-day grace period to come up with the money.

It then missed payments worth another $193m on 29 September and 11 October. They also allowed for a 30-day grace period for payment.

An announcement this week that a deal to sell a 50.1% stake in its property services arm for $2.6m had fallen through increased concern that it might go into default. It also failed to sell its Hong Kong headquarters for $1.7bn.

A string of Chinese officials in recent days have sought to reassure investors, saying that creditors’ interests would be protected. Market participants nevertheless expressed shock at news of the payment.

“This is a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management, adding many had expected a default.

The news would boost bondholders’ confidence, he said, as “there are many coupon payments due ahead. If Evergrande pays this time, I don’t see why it won’t pay the next time”.

Non-payment of interest for 30 days would result in a formal default by the company, and trigger cross-default provisions for other Evergrande dollar bonds.

Evergrande’s dollar bonds surged in value on Friday morning, with its April 2022 and 2023 notes jumping more than 10%, according to data provider Duration Finance.

Evergrande’s shares rose about 4%, a day after the resumption of trade after a more than two-week suspension pending the announcement of a scrapped stake sale in its property management unit.

The Hang Seng mainland properties index surged more than 5% in early trade, against a 0.13% rise in the broader Hang Seng index.

In an announcement about the failed asset sales on Wednesday, Evergrande did offer a clue about the bond repayment. It noted pointedly that the group “has a 30-day grace period to pay interest after the interest becomes due under its US dollar-denominated notes” and that the grace periods “have not expired’.

However, in the same statement it repeated an admission first made to the stock market in September that it was struggling under the weight of its huge debt burden, brought on by the loss of funding sources and a rapidly cooling housing market.

“In view of the difficulties, challenges and uncertainties in improving its liquidity, there is no guarantee that the group will be able to meet its financial obligations under the relevant financing documents and other contracts,” the statement said.


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