Evergrande pays missed dollar bond coupon, Chinese state media say

Evergrande, the heavily indebted Chinese real estate developer, repaid a missed interest payment on a dollar bond, state media reported just days ahead of a deadline that would have forced a formal default.

The Securities Times reported on Friday that the real estate group had transferred an interest payment of $ 83.5 million to Citibank, the trustee, a day earlier and that the funds would be released to investors before the expiration of the grace period. this week-end.

Evergrande’s non-payment of the coupon by the September 23 deadline has triggered volatility in international markets and a questioning of the health of the slowing Chinese real estate sector, which is under pressure from the government to reduce debt.

The missed payment had triggered a 30-day grace period, which was due to expire at midnight on Saturday in New York City, resulting in default and paving the way for a group of investors with enough bonds to take legal action.

News of the last-minute payment came after a period of uncertainty for investors, but Evergrande has not provided a formal statement or regulatory filing in Hong Kong to clarify the implications for the group’s future.

“I don’t think this significantly changes the likelihood of a restructuring, although it will likely delay the company’s immediate need to engage with creditors,” said a person advising investors on the process. “I think bondholders will always be in ‘wait and see’ mode.”

Evergrande’s Hong Kong-listed shares rose 7.8% on Friday, putting the stock on track for its first rise since late September, when the developer revealed it had raised Rmb 10 billion (1, $ 5 billion) by selling part of its stake in a Chinese lender.

Hong Kong’s Hang Seng Mainland Property Index rose 3.43 percent while the larger Hang Seng index rose 0.39 percent.

The group, which faces more than $ 300 billion in total liabilities and missed four other offshore interest payments in recent weeks, broke its silence on the payments in a filing on Wednesday in which it noted that the deadline of grace had not expired.

Advisors to international bondholders complained this month that they had no “significant commitments” from the company and expressed concern over its continued asset sale.

Beijing also weighed in on the issue for the first time last Friday, with a People’s Bank of China official blaming the company for its liquidity crisis but saying the fallout to the financial system was “controllable.”

China’s Banking and Insurance Regulatory Commission said Evergrande was an “individual” case at a briefing in Beijing on Thursday.

Some of Evergrande’s peers, including luxury developer Fantasia Group and Sinic Holdings, have defaulted on smaller bonds, while riskier Chinese borrower yields in international markets hit their highest levels since 2009.

Kaisa, another developer, has a bond interest payment due Friday which is closely watched. The bond is trading at 35 cents to the dollar.

Evergrande’s liquidity crisis, which has accelerated since July and led the company to warn the company against the risk of default at the end of August, has fueled expectations for one of the most important restructuring processes of Chinese history.

A longtime investor in Chinese real estate bonds suggested that the payment announced on Friday was a “temporary” measure intended to “save time. [and] avoid prosecution for now ”.

A suspension of more than two weeks on Evergrande was lifted on Thursday after the company revealed it had ended a potential sale of its real estate services unit a week earlier.

The potential buyer, Hopson Development Holdings, said in a statement Thursday that after seeking legal advice, it viewed the agreement as “legally binding.”

Evergrande also said this week that he would “fully cooperate” with an investigation into his accounts by the Hong Kong accounting watchdog, which is also investigating the PwC audit of the company.

Evergrande did not immediately respond to a request for comment.

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