Evergrande Real Estate Group Updates
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Investors in an offshore Evergrande bond say they have yet to receive a close-up payment of interest due Thursday, adding to uncertainty about an unfolding liquidity crisis at the world’s most indebted property developer.
The $83.5 million payment had a deadline of midnight in New York on Thursday, or noon on Friday in Hong Kong. Two people with direct knowledge of the matter said no payment had been received in Hong Kong on Friday morning.
The real estate group, which has not made a statement about the repayment, has a grace period of 30 days before any non-payment officially results in a default.
Evergrande, widely expected to default for weeks, is at the center of an unfolding storm over the health of China’s massive real estate sector as the government tries to tackle excessive debt.
His woes shook global stock and commodities markets ahead of the impending payment deadline this week as traders weighed the implications of a slowdown in a real estate sector that has anchored China’s economic growth for decades.
The developer, which has a total debt of more than $300 billion, warned of the risk of default in August after a rare public reprimand from Beijing. Falling prices of its debt helped boost yields in the $400 billion Asian high-yield bond market, where it is one of the largest borrowers.
The dollar-denominated bond with interest due on Thursday has fallen in price as investors expected a missed payment that would usher in the largest restructuring process in China’s financial history. The note, which expires next year, is currently trading at $0.33 on the dollar.
Many of Evergrande’s dollar bonds traded at about 30 cents against the dollar on Friday, indicating significant trouble, while Hong Kong-listed shares in the company fell as much as 6.7 percent, dropping more than 80 percent this year. Shares of the company’s electric vehicle subsidiary fell a whopping 22.7 percent.
“Whether it gets paid or not doesn’t change the uncertainty,” said Michel Löwy, chief executive of SC Lowy, a Hong Kong-based investment group. “[Unless there is] some form of central intervention and significant liquidity [is added] for the group there has to be a restructuring.”
Evergrande gave a glimmer of hope in Asian trade on Wednesday when it announced it had reached an agreement with onshore bondholders for a separate interest payment on Thursday on a renminbi-denominated bond, without providing specific details.
The company faces other deadlines, including a $45 million payment due next Wednesday for a bond maturing in 2024. It has a total of approximately $20 billion in outstanding debt in international markets.
Within China, Evergrande is grappling with its obligations to private investors in wealth management products, who gathered at its Shenzhen headquarters last week to protest, as well as commitments to suppliers and contractors on hundreds of development projects in China.
“If offshore investors get a settlement that is 10 to 15 cents above the current trading price, I think people will” [will] just move on,” said one veteran Chinese debt investor, adding that authorities would likely use Evergrande to message other developers.