Reports: China’s Evergrande will pay important bonds to avoid looming default | Evergrande

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Troubled real estate firm China Evergrande Group has found the money to pay off an $83.5 million bond interest payment it missed in September, according to reports.

The Chinese state-backed newspaper, “Securities Times”, said on Friday, citing related channels, that the company, which has debts of about $305 billion, has sent a payment of $83.5 million and the owners will receive it before Saturday.

Reuters also reported that Evergrande deposited funds into a trustee’s account Thursday night before the 30-day grace period for payment expired, citing a source.

A Hong Kong restructuring lawyer representing some of the bondholders told Reuters: “It seems they are avoiding short-term defaults, and it is comforting that they have been able to find liquidity.

But even so, Evergrande still needs to restructure its debt. This push may be a way for them to get some kind of endorsement with stakeholders before the hard work required for restructuring.”

Evergrande, China’s second-largest real estate developer, alarmed global financial markets when it announced in September that it may not be able to pay many of its creditors ranging from homebuyers, builders, banks and foreign investors.

She missed her $83.5 million bond repayment on September 23 but has a 30-day grace period to get the money back.

It then defaulted on payments of another $193 million on September 29 and October 11. They also allowed a 30-day grace period for payment.

The announcement this week that a deal to sell a 50.1 per cent stake in the real estate services arm for $2.6 million was held back by growing concern that it would default. It also failed to sell its Hong Kong headquarters for $1.7 billion.

A string of Chinese officials in recent days have sought to reassure investors, saying that creditors’ interests will be protected. However, market participants expressed shock at the news of the payment.

“This is a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management, adding that many had expected a default.

He said the news will boost bondholders’ confidence, as “there are many coupon payments due in the future. If I pay Evergrande this time, I don’t understand why it won’t be paid next time.”

Failure to pay interest for 30 days may cause the company to formally default, and result in cross default provisions for other Evergrande dollar bonds.

Evergrande dollar bonds soared Friday morning, with April 2022 and 2023 bonds jumping more than 10%, according to data provider Duration Finance.

Evergrande shares are up about 4%, a day after trading resumed after more than two weeks of suspension pending the announcement of the sale of a canceled stake in its property management unit.

The Hang Seng real estate index on the mainland is up more than 5% in early trade, versus a 0.13% rise in the broader Hang Seng.

In an announcement of failed asset sales on Wednesday, Evergrande offered an idea of ​​the bond repayment. He clearly indicated that the group “has a grace period of 30 days to pay interest after interest becomes due under its US dollar-denominated bonds” and that the grace periods “have not expired”.

However, in the same statement, it reiterated an admission it first made to the stock market in September that it was struggling under the weight of its massive debt burden, caused by the loss of funding sources and the rapid slowdown in the housing market.

“In light of the difficulties, challenges and uncertainties in improving liquidity, there is no guarantee that the Group will be able to meet its financial obligations under the relevant financing documents and other contracts,” the statement said.

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