Uncertainty over the full extent of Evergrande’s debt load, beyond its more than $300 billion reported in liabilities, has plagued investors since a liquidity crisis at the firm stoked fears of a collapse that could trigger financial and economic contagion.
People familiar with the matter have said that a dollar note maturing Oct. 3 issued at an initial amount of $260 million by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande. As the maturity is a Sunday, the effective due date is Monday. The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.
Non-payment of the bond principal would constitute a default as the note has no grace period, although five business days would be allowed if failure to pay is down to administrative and technical error, according to the people. Details of the guarantees weren’t broadly known as the note prospectus isn’t publicly available and the deal wasn’t listed on exchanges. Monday is a holiday in China.
- Hopson to Buy 51% of Evergrande Mgmt Unit for HK$40b: Cailian
- Evergrande, Property Management Unit Suspend Hong Kong Trading
- Nervy Markets Await Outcome for Opaque Bond Tied to Evergrande
- China Steps Up Efforts to Ring-Fence Evergrande, Not to Save it
- China Builder Sinic Faces Creditor Demanding $75 Million Payment
- The Evergrande Fear Has Receded Too Easily: John Authers
- Evergrande Sep. Sales Drop 55% M/M Amid Crisis, Data Indicate
- Evergrande Woes Spread to Sweden With EV Unit Seeking New Owners
- Evergrande Pays Back Some Cash Owed to Wealth Product Investors
Hopson Development Plans Evergrande Property Stake (10:48 a.m.)
Hopson Development plans to acquire a 51% stake in Evergrande Property Services for more than HK$40 billion, Cailian reported, citing unidentified people. That would value the firm more than 40% above Thursday’s closing market value of HK$55.4 billion. The Hong Kong stock market was closed for a public holiday Friday, before trading in Evergrande property shares were suspended along with those of its parent on Monday.
Evergrande’s 8.25% dollar bond due March 2022 was indicated 0.7 cent on the dollar higher at 25.9 cents, according to Bloomberg-compiled data.
China Builder Sinic Faces Creditor Demanding $75 Million Payment (10:24 a.m.)
Amid heightened scrutiny on Chinese property firms with Evergrande contagion fears rippling through the sector, Sinic Holdings Group Co. has received a demand to repay some debt after missing two local interest payments.
A creditor of the Chinese developer is demanding repayment of $75.4 million in outstanding principal and accrued interest, after the firm failed to repay 38.7 million yuan ($6 million) of interest on two onshore financing arrangements on Sept. 18, according to a Hong Kong stock exchange filing dated Sept. 30.
Trading in Shares Suspended (9:37 a.m.)
No reason was given for the trading halts in China Evergrande and Evergrande Property Services. The former’s shares have plunged 80% this year and its bonds have tumbled to levels that suggest investors are bracing for a default. Evergrande has a market value of HK$39.1 billion.
Shares of the developer’s other unit, China Evergrande New Energy Vehicle Group Ltd., haven’t been suspended. The stock was little changed in Hong Kong trade after earlier falling as much as 8.3%.
Markets Await Clues on Bond Tied to Evergrande (8:35 a.m.)
Any failure to pay Jumbo Fortune’s note may also pose a risk of cross-default for Evergrande’s other bonds, according to Bloomberg Intelligence analyst Daniel Fan. Creditors of the Jumbo note could potentially ask the trustee to declare a formal default if they achieve a minimum threshold of investors, and that could trigger holders of other dollar bonds to do the same, he said.
Cross-guarantees have been a problem for China over the past decade with the rise of shadow banking, said Andrew Collier, managing director of Orient Capital Research in Hong Kong. “There is little ability to find out the size of the problem until there is a debt blowup and creditors worry about not getting paid.”
China Will do Everything it Can to Ring-Fence Risk (8:28 a.m.)
China has signaled it will do everything it can to ring-fence Evergrande, while showing little interest in a direct bailout of the developer. That doesn’t bode well for bondhholders – both onshore and abroad — looking for some kind of rescue from the Chinese government.
Beijing has stepped up efforts to limit fallout, having dispatched top financial regulators to nudge banks to ease credit for home buyers and support the property sector. They also bought out part of Evergrande’s stake in a struggling bank to limit contagion. Over the past 10 days, the central bank has pumped 790 billion yuan into the financial system.