Evergrande makes coupon payment ahead of Friday deadline: Reuters

The sign of the Evergrande China Center appears on the facade of the building.

Catherine Cheng | SOPA photos | Light Rocket | Getty Images

Two people with direct knowledge of the matter said cash-strapped China Evergrande Group made payments for an offshore bond coupon before the grace period expired on Friday.

Evergrande, once a top-selling developer in China, has more than $300 billion in liabilities, raising concerns about the impact of its fate on the world’s second-largest economy and global markets.

The property developer, which avoided default last week by securing $83.5 million for a last-minute payment of interest on the bond, needed to make $47.5 million in coupon payments to bondholders by Friday.

Evergrande did not respond to a Reuters request for comment. The people refused to reveal their identity due to the sensitivity of the matter.

Evergrande shares are up more than 1% in early trading Friday, versus a 0.4% drop in the Hang Seng Index.

Evergrande missed coupon payments totaling nearly $280 million on its dollar bonds on September 23, September 29 and October 11, beginning 30-day grace periods each.

It still had approximately $338 million in other offshore coupon payments due in November and December.

The New York Times previously reported that the developer paid interest, citing a person who spoke on the condition of anonymity.

“Evergrande has done its best to solve the liquidity issues, but it is a bit difficult to raise enough capital to pay all the debts,” said Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong.

“I think there will be some negotiations between Evergrande and its affiliated lenders, so some kind of haircut could still be done. The market still needs some time to absorb and pricing it.”

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debt crisis

Evergrande’s problems have worsened over months, and its dwindling resources versus its massive liabilities wiped out 80% of its value, leading some analysts to consider default at some point inevitable.

Even with Evergrande securing funds to make payments, other Chinese developers whose fortunes have been hit by market concerns about Evergrande’s debt crisis have slipped into an official default.

Fantasia Group Holdings, Cinch Holdings, China Properties Group and Modern Land defaulted on dollar debt obligations this month.

Sources said other developers with large debts in dollars have proposed extending the maturities of external bonds or initiating debt restructuring at a meeting with regulators.

In a meeting with developers this week, the National Development and Reform Commission and the State Administration of Foreign Exchange told developers facing large debt maturities abroad to assess repayment risks and report difficulties.

Concerns about the systemic impact of a default by Evergrande have widened spreads on Chinese high-yield dollar debt to record levels as investors demand higher risk premiums.

This concern also kept the cost of insuring against default in China’s sovereign debt high. That cost earlier this month reached its highest level since the epidemic peaked in 2020.

Banking exposure

Founded in Guangzhou in 1996, Evergrande represents a free era of borrowing and building. But that business model has been frustrated by hundreds of new rules designed to curb developer debt frenzy and boost affordable housing.

Any prospect of Evergrande’s death raises questions about the fate of its more than 1,300 real estate projects in some 280 cities.

The exposure of banks to developers is also extensive.

A leaked 2020 document, described as fake by Evergrande but taken seriously by analysts, showed that the developer’s obligations extended to more than 128 banks and more than 121 non-bank institutions.

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