Evergrande still faces MAJOR debt obligations in the coming years despite Thursday’s interest payment ‘resolution’
Although markets have exhaled a sign of relief at the news that Evergrande has reached an agreement with creditors on the expected interest payment on Thursday, the odds for the heavily indebted property developer are not yet clear.
Markets around the world were delighted to hear that Evergrande vaguely confirmed that it would make an interest payment of 232 million yuan on September 23, sending significantly higher futures contracts. However, the euphoria is unlikely to last long, as the developer has yet to a lot no more debt obligations due.
For starters, Thursday’s payment suggests that Evergrande has reached consensus with local bondholders to defer payments without declaring the move as a default. “Evergrande may have come to some kind of deadlock with onshore holders,” said Daniel Fan, credit analyst at Bloomberg Intelligence. “They might have told them not to act, waiting for a negotiation of a rescheduling or something like that.”
However, the property developer still faces significant interest obligations to offshore bondholders – to the tune of $ 83.5 million on September 23 on its 8.25% bonds due in 2022 to be exact. . And, with those bonds falling 0.7 cents to trade around 24.5 cents, it suggests that creditors are still anticipating a major default.
The reality is that Evergrande’s problems are only just beginning, as the company still owes billions of dollars to onshore and offshore creditors over the next few years and months. In the next three months alone, the company owes $ 669 million in interest payments by year-end, on top of the $ 83.5 million in coupon payments due on September 23.
In short, Evergrande simply cannot afford to continue pursuing payment-by-payment lawsuits with its many creditors until its debt fiasco is finally resolved. Therefore, Evergrande’s optimistic announcement that he has come to a compromise on Thursday’s interest payment only procrastinates the inevitable.
Information for this briefing was found via Bloomberg. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.