Evergrande’s silence on bond yields keeps investors on their toes

(Bloomberg) — The lack of any announcement from the China Evergrande Group regarding an $83.5 million interest payment owed Thursday on a dollar-denominated bond adds to the uncertainty surrounding the developers’ problems.

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Asia’s largest issuer of junk-rated bonds has so far made no IPO or public announcement about the coupon. Two holders of the note, which expires in March, had told Bloomberg they had not received payment by 5 p.m.

Evergrande, the most indebted developer in the world, has a grace period of 30 days to make the payment before a default can be declared. Investors have estimated a significant chance of a missed payment or a small fraction of face value in a potential restructuring.

Earlier this week and over a separate interest payment on a local bond, Evergrande had issued a vague statement regarding the resolution of that 232 million yuan ($36 million) coupon. But that filing did not specify how much interest would be paid or when.

Evergrandes stocks and dollar bonds rose Thursday as trading resumed in Hong Kong after a holiday, helping boost gains for the Chinese real estate company after recent sharp declines. But an ongoing information vacuum about dollar bill interest rates could raise questions about how sustainable such increases could be.

The situation also harks back to April and another major distressed debt case from China. Subsequently, a lack of information about the situation regarding China Huarong Asset Management Co. caused corporate dollar bonds to plummet and put a damper on the broader market.

As with Huarong, a dominant question for Evergrande was what role the government could play in a possible reorganization of the company. It took nearly five months after Huarong said it could not release its 2020 results before a state-led bailout of the government-controlled ailing asset manager was unveiled.

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Financial regulators have ordered Evergrande to focus on completing unfinished properties and paying back individual investors while avoiding short-term default on dollar bonds, according to a person familiar with the matter. There is no indication that officials have offered financial support to the company.

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