Investors prepare for a rough ride as Evergrande faces coupon payment deadlines

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Police and security guards keep a constant vigil outside the headquarters of the Evergrande Group in China on September 26, 2021 in Shenzhen, Guangdong Province, China. Reuters / Eli Song

September 29, 2021

HONG KONG (Reuters) – China Evergrande faces the next test in the public market on Wednesday, with a deadline for bond coupon payments to offshore investors.

Evergrande has a debt of $305 billion, raising concerns that the problem could spread across China’s financial system and resonate around the world. So far, concerns have been eased as the damage is concentrated in the real estate sector.

Evergrande Group plans to sell its 9.9 billion yuan ($1.5 billion) stake in Shengjing Bank to a state-owned asset management company, developers said in a forex announcement on Wednesday.

Shengjing Bank, one of Evergrande’s major lenders, demanded that all net proceeds from the settlement be applied by the lender to settle the developer’s financial debt, it said.

The move comes as Evergrande, once the best-selling developer in China and now expected to undergo one of the largest restructurings in China’s history, prioritizes domestic creditors over offshore creditors. I emphasize this.

The company missed the deadline for dollar bonds when it said last week that China’s major real estate business was in talks with land bondholders to settle individual coupon payments for RMB-denominated bonds. ..

The company will pay $47.5 million in bond interest Wednesday for a 9.5% bond in March 2024.

Due to Evergrande’s silence on offshore payment obligations, investors around the world are suspecting they will suffer major losses at the end of last week’s 30-day grace period and Wednesday’s coupon payment deadline.

An Evergrande spokesperson did not immediately respond to a Reuters request for comment.

“Currently waiting. Creditors are organizing themselves and people are trying to understand how to catch this falling knife,” said an offshore evergreen bondholder. An advisor appointed by one of them he said.

“They failed to pay last week, I think they probably won’t pay for it. That doesn’t mean they’re not going to pay… they have a 30-day grace period.” Said the advisor, who declined to be named due to the sensitivity of the problem.

government promotion

Evergrande, once faced with China’s bullish architectural boom, is now facing a developer loan crackdown, increasing global market volatility and investors big and small sweating their exposure. ..

Evergrande’s troubles blamed the global stock market earlier this month.

In the weeks that followed, some global investors have turned their attention to the political debate in Washington over rising US debt limits and Treasury yields that are putting pressure on equities. [.N]

The negative surprise of Evergrande may further benefit the bears in the stock market.

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

Officials are hopeful that the purchase of the property could avoid, or at least reduce, social unrest if Evergrande suffers a nasty collapse.

On Monday, China’s central bank in a statement posted on its website vowed to protect consumers exposed to the housing market without mentioning Evergrande, which gave the banking system more cash. I injected it.

These moves have boosted investor sentiment towards Chinese real estate stocks over the past few days, with Evergrande shares up 15% on Wednesday.

(Reporting by Claire Jim, Karin Strohecker, Donny Kwok, Writing by Ira Iosbashvili and Sumeet Chatterjee, Editing by Sonya Hepinstall and Stephen Coates)

Investors prepare for a rough ride as Evergrande faces coupon payment deadlines

SourceLink Investors are preparing for a rough ride as Evergrande faces coupon payment deadline

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