Evergrande bondholders prepare for Monday coupon expiration

The China Evergrande Center building sign in Hong Kong

© Reuters/TYRONE SIU
The China Evergrande Center building sign in Hong Kong

Por Andrew Galbraith

SHANGHAI, Oct 11 (Reuters) – Overseas bondholders of indebted real estate developer China Evergrande Group were waiting for news on Monday of more than $ 148 million in interest due to expire after the company missed two deadlines. coupon payment last month.

Expectations that Evergrande will meet semi-annual payments on its April 2022, April 2023, and April 2024 bonds, which mature on October 11, are slim as it is prioritizing creditors in mainland China while saving silence about your dollar debt obligations.

This has left foreign investors concerned about the risk of incurring large losses at the end of the 30-day grace periods, as the developer faces more than $ 300 billion in liabilities.

Evergrande’s troubles have shaken world markets and the company has already defaulted on dollar bonds for a combined value of $ 131 million, which were due on September 23 and 29.

Advisers to overseas bondholders said on Friday they want more information and transparency from the property developer, which has liquidity problems.

Foreign bondholders are also demanding more information about Evergrande’s plan to divest some businesses and how the proceeds will be used, the advisers said.

Trading in Evergrande’s shares, as well as its Evergrande Property Services Group unit, has been suspended since October 4 pending the announcement of a major deal. On Monday, the company’s electric vehicle unit was oscillating between big profit and loss, falling as much as 4.65% and rising as much as 9.28%.

Fears that Evergrande’s woes would spread to the broader Chinese real estate sector resulted in a strong sale of high-yield Chinese dollar debt last week, especially after smaller developer Fantasia Holdings Group Co defaulted on the term of payment of a debt of 206 million dollars in the international market on October 4.

The option-adjusted spread of the ICE BofA Asian Dollar High Yield Corporate China Issuers Index was last recorded in the United States on Friday afternoon at 2,069 basis points, marking its largest expansion.

Fantasia Group China Co said on Monday that it will adjust the trading mechanism for its Shanghai-listed bonds following credit downgrades from China Chengxin International Credit Rating Co (CCXI), and said its parent had formed an emergency group to resolve the problems of liquidity.

The move comes after the Shanghai Stock Exchange halted trading on two of Fantasia Group’s listed bonds on Friday after sharp declines, and echoes a similar adjustment in trading for Evergrande’s mainland-traded bonds. last month.

“We believe that regulators have a zero tolerance for the emergence of systemic risk and aim to maintain a stable real estate market, and political support could come if the deterioration in real estate activity levels worsens,” said Kenneth Ho, Head of Strategy at Goldman Sachs Asia Credit.

“That said, we also believe that regulators do not want to overstimulate, and their long-term goal is to reduce real estate leverage. Finding the right balance may take more time, and uncertainties are likely to be a continuing source of volatility. for the Chinese real estate market (high yield). “

(Reporting by Andrew Galbraith; editing by Shri Navaratnam; translation by Flora Gómez in the Gdansk newsroom)

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