Evergrande set to miss second offshore bond coupon payment this month, sources say

HONG KONG, Sept. 29 (Reuters) – At least some of China Evergrande’s offshore bondholders had not received a coupon due to close operations in Asia on Wednesday, sources said, although the developer was short of silver reached a $ 1.5 billion deal to pay off its debt. with a Chinese bank.

With liabilities of $ 305 billion, Evergrande has raised fears that its woes will spill over into China’s financial system and reverberate around the world – a concern that has eased with the Chinese central bank’s promise to protect interests of home buyers.

The company, which has nearly $ 20 billion in offshore debt, was due to make a bond interest payment of $ 47.5 million on its March 2024 9.5% dollar bond on Wednesday. It also missed paying an $ 83.5 million coupon on another bond last Thursday.

Two people familiar with the matter, who declined to be named due to the sensitivity of the matter, said at least some of the 2024 bond holders had not received any information from Evergrande (3333.HK) regarding payment Wednesday.

It was not immediately clear whether payment could still be made during U.S. business hours.

A spokesperson for Evergrande did not immediately comment. Reuters could not determine whether Evergrande told any of the bondholders what he planned to do about Wednesday’s coupon payment.

Evergrande’s silence on its offshore payment obligations since the missed payment last week has left global investors wondering whether they will have to swallow large losses at the end of the 30-day grace periods for coupons due on 23 December. and September 29.

The company, once the best-selling developer in China and is now set to be one of the biggest restructurings ever in the country, has prioritized domestic creditors over offshore bondholders.

It missed a dollar bond payment deadline last Thursday, a day after its main real estate business in China said it had negotiated privately with onshore bondholders to settle a separate coupon payment on a denominated bond. in yuan.

In the latest of those moves, Evergrande said in an exchange brief Wednesday that it would sell a 9.99 billion yuan ($ 1.5 billion) stake it owns in Shengjing Bank Co Ltd (2066. HK) to a state-owned asset management company.

The bank, one of Evergrande’s main lenders, demanded that all net proceeds from the sale be used to settle the developer’s debts with Shengjing. Read more In the first half of last year, the bank had 7 billion yuan in loans in Evergrande, according to a report by brokerage firm CCB International, citing news articles.

This decision highlights the role that public companies can play in the outcome of Evergrande.

“We are currently in a waiting phase. Creditors are organizing and people are trying to figure out how this falling knife could be caught,” said an adviser hired by one of Evergrande’s offshore bondholders. .

“The time has started for a restructuring process. The company is going to have to do something, it is obviously struggling with liquidity… the liquidity problem is what brings down the house of cards.”

GOVERNMENT STEPS UP

Once the face of China’s frenzied construction boom, Evergrande has now become the child star of the developer debt crackdown that has spurred volatility in global markets and left investors large and small to sweat their exposure.

Evergrande’s problems hit global stock markets earlier this month, although some global investors have since focused on political wrangling in Washington over the US debt ceiling and rising Treasury yields. which put the actions under pressure. Read more

Nonetheless, any negative surprises from Evergrande could give stock bears more ammunition.

Rating agency Fitch on Wednesday downgraded the default ratings of long-term foreign currency issuers (IDRs) of Evergrande and its subsidiaries, Hengda and Tianji, citing the likely non-payment of offshore bond interest last week.

Beijing is pushing public companies and state-backed real estate developers such as China Vanke Co Ltd (0000002.SZ) to buy some of Evergrande’s assets, people familiar with the matter told Reuters. Read more

Authorities hope the asset purchases will avoid or at least alleviate social unrest that could arise if Evergrande were to suffer a disorderly collapse, they said, declining to be identified due to the sensitivity of the matter.

On Monday, China’s central bank pledged to protect consumers exposed to the real estate market, without mentioning Evergrande in a statement posted on its website, and pumped more money into the banking system. Read more

The moves boosted investor sentiment towards Chinese real estate stocks over the past two days, with Evergrande stock rising 17% on Wednesday before closing 15% higher. Read more

Reporting by Anshuman Daga, Andrew Galbraith, Tom Arnold, Clare Jim, Karin Strohecker, Donny Kwok; Written by Sumeet Chatterjee; Editing by Stephen Coates, Kirsten Donovan

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