Investors brace for tough race as Evergrande faces coupon payment deadline

Police and security personnel keep watch outside the China Evergrande Group Headquarters in Shenzhen, Guangdong Province, China on September 26, 2021. REUTERS / Aly Song

  • Evergrande faces Wednesday interest payment deadline
  • Bondholder advisor expects Evergrande to miss deadline
  • The company sold a $ 1.5 billion stake in Shengjing Bank
  • Evergrande shares increase by up to 15%

HONG KONG, Sept.29 (Reuters) – China Evergrande Group (3333.HK) faces its next test in public markets with the deadline for paying a bond coupon to offshore investors on Wednesday, as the property developer cash-strapped scrambles to sell part of its assets.

With liabilities of $ 305 billion, Evergrande has raised fears that its problems will spill over into China’s financial system and reverberate around the world – a concern that has eased as the damage has so far concentrated in the real estate sector.

Evergrande plans to 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, has the developer announced Wednesday in an exchange document.

Shengjing Bank, one of Evergrande’s main lenders, had demanded that all net proceeds from the divestiture be used to settle the developer’s financial debts to the lender, he said.

The move highlights how Evergrande, once the best-selling developer in China and now set to be one of the biggest restructurings ever in the country, prioritizes domestic creditors over offshore bondholders.

The company missed a dollar bond payment deadline last week, 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 bond denominated in yuan.

The company is due to make a bond interest payment of $ 47.5 million on its March 2024 9.5% dollar bond on Wednesday.

Evergrande’s silence on its offshore payment obligations has led global investors to question whether they will have to take significant losses at the end of a 30-day grace period for last week and coupon payment deadlines. Wednesday.

An Evergrande spokesperson did not immediately respond to Reuters’ request for comment.

“We are in the waiting phase at the moment. Creditors are organizing and people are trying to figure out how this falling knife could be caught,” said an adviser hired by one of the offshore bond holders of ‘Evergrande.

“They didn’t pay last week, I think they probably won’t pay this one. It doesn’t necessarily mean they won’t pay… they have the 30 day grace period,” said the counselor. refusing to be named due to the sensitivity of the matter.


Once the face of China’s frenzied construction boom, Evergrande has now become the face of a 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. Read more

In the weeks that followed, some global investors focused on the political wrangling in Washington over the US debt ceiling and rising Treasury yields that put stocks under pressure.

Any negative surprises from Evergrande could give stock bears more ammo.

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 have boosted investor sentiment towards Chinese real estate stocks over the past two days, with Evergrande stock rising 15% on Wednesday. Read more

Reporting by Clare Jim, Karin Strohecker, Donny Kwok; Written by Ira Iosebashvili and Sumeet Chatterjee; Editing by Sonya Hepinstall and Stephen Coates

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