Real estate developer Evergrande reportedly paid bond interest
A real estate complex from Chinese real estate developer Evergrande in Beijing. Evergrande, in debt, handed over the funds for a key interest payment that was due on September 23 – before a 30-day grace period, Chinese state media Securities Times reported.
Noël Celis | AFP | Getty Images
Evergrande handed over the funds for a key interest payment that was due on September 23 – ahead of a 30-day grace period that ends on Saturday, according to Chinese state media Securities Times.
This will allow the indebted Chinese real estate developer to avoid a widely expected default.
Evergrande shares have climbed more than 4% on the news.
The $ 83.5 interest payment on Evergrande’s March 2022 offshore bond has been closely watched since the heavily indebted property developer twice warned in September that it could default. The dollar bonds are largely held by foreign investors.
The Securities Times report said Evergrande planned to make the interest payment on time for the Oct. 23 deadline and that the struggling real estate developer had turned over the $ 83.5 million through Citibank. The bank declined CNBC’s request for comment.
CNBC has also reached out to Evergrande for comment.
Evergrande missed four more coupon payments in September and October. Further interest payments on its US dollar bonds are due in November and December.
In total, Evergrande missed payments of at least $ 279 million as of last month, according to Reuters, that figure would include the September 23 payment.
The world’s most indebted real estate developer is weighed down by more than $ 300 billion in debt and struggles to raise money to pay suppliers and investors.
Evergrande fears contagion
Concerns over its massive debt rocked global markets, amid concerns about a possible spillover into the rest of China’s real estate industry or economy.
Markets generally expected Evergrande to default on interest payments, as analysts said domestic investors would be given priority over foreign investors.
But Evergrande suffered a setback this week, when a deal to sell some of its assets and provide much-needed funds failed.
It was in talks earlier this month to sell a 50.1% stake in Evergrande Property Services, its services unit, to smaller rival Hopson Development Holdings. But Hopson announced on Wednesday that the agreement – which would have been worth 20.04 billion Hong Kong dollars ($ 2.58 billion) – failed.
China’s three “red lines”
Evergrande’s problems came to a head after authorities implemented the “three red lines” policy last year. This policy places a limit on indebtedness based on a company’s cash flow, assets and capital levels. It started to hold back developers after years of growth fueled by excessive debt.
In the last few years, Chinese developers have taken on more and more debt, especially in foreign markets.
Between 2016 and 2020, the value of the industry’s US dollar offshore bonds increased by 900 billion yuan ($ 139.75 billion), nearly twice the growth of 500 billion yuan in onshore yuan bonds, according to the report. Nomura.
Evergrande was by far the leader in overseas debt issuance, representing six of the 10 largest U.S. dollar-denominated offshore bond deals by Chinese real estate companies between 2016 and 2021, according to Dealogic.
In the first half of this year, Evergrande held 19% of the high yield bonds denominated in US dollars among Chinese real estate companies – the largest share, worth $ 19.24 billion, according to Natixis.
– This is a developing story. Please check for updates.