Business Maverick

Business Maverick

Bond Deadline Looms; Hui’s Megayacht in Focus: Evergrande Update

Unfinished buildings at China Evergrande Group's Health Valley development on the outskirts of Nanjing, China, on Friday, Oct. 22, 2021. China Evergrande Group pulled back from the brink of default by paying a bond coupon before Saturday’s deadline, giving the property giant at least another week to come to grips with a debt crisis that has rattled investor confidence in the world’s second-largest economy. Photographer: Qilai Shen/Bloomberg

A unit of China Evergrande Group faces a key deadline for a coupon payment Saturday, while bondholders eye the personal assets of the company’s founder -- including a megayacht in Hong Kong -- to weigh his ability to meet some of the liabilities.

Evergrande’s Scenery Journey Ltd. has $82.5 million in coupons coming due on two dollar bonds. Next Wednesday, the grace period expires for other bond-interest payments owed by the embattled property developer.

Meanwhile, with Chinese authorities urging Evergrande’s billionaire founder Hui Ka Yan to use his own money to alleviate the company’s debt crisis, his personal balance sheet has attracted attention from bond investors.

The selloff in China’s stressed property developers resumed on Thursday, amid signs of contagion spreading to the onshore market. The nation’s most widely-owned junk debt is now worth $37 billion less than when they were first sold to investors.

Kaisa Group Holdings Ltd.’s bonds and shares tumbled after a wealth-management product guaranteed by the company missed a payment deadline. China’s dollar high-yield debt fell for the 10th day in 11 after yields climbed above 21%. Trading was halted in two yuan bonds from other real estate firms after they plunged more than 20%.

Key Developments:

Junk Buyers Looking at $37 Billion Loss (8 a.m. HK)

In a sign of how severe China’s property bond rout has become, the nation’s most widely-owned junk debt is now worth $37 billion less than when they were first sold to investors.

The 320 notes included in a Bloomberg index of Chinese high yield dollar debt are valued at a combined $102.5 billion, versus their face value of $139 billion, according to data compiled by Bloomberg as of Nov. 3. Yango’s bonds are at the steepest discounts to where they were issued, with three notes trading at less than 13 cents. The index, predominantly made up of property firms, is down about 26% since May.

That valuation gap is likely to widen. With Chinese junk yields surging past 20%, refinancing upcoming maturities with new bonds has become too expensive. Regulatory limits on leverage mean highly indebted firms like Evergrande haven’t tapped the market in months. Fresh cash is hard to come by as slowing property sales drag on revenue, slumping shares reduce the value of listed assets and other disposals prove difficult to complete. Some developers even have dividends to pay.

China high yield spreads are near a record

Evergrande Bondholders Eye Yacht, Planes, Mansions (2:45 p.m. NY)

With Chinese authorities urging Hui to use his own money to alleviate Evergrande’s market-roiling crisis, the property tycoon’s personal balance sheet has become a key variable for bond investors trying to game out how long the developer can stave off default.

Measuring Hui’s financial firepower isn’t easy, given that many of his assets are held through an intricate web of companies and affiliates that can obscure their ultimate owner.

Still, Hui’s luxury assets alone could help cover the more than $400 million in bond coupons that are yet to come due or have grace periods ending this year. The possessions –- valued at an estimated $485 million — include a yacht, business jets and houses under Hui’s name or affiliates of the developer. Last month, Evergrande paid two bond coupons before the end of a grace period following the pledge of some shares and a mansion.


Yacht Event, owned by Evergrande chairm, parked in Hong Kong.

EV Maker Bedeo Buys Startup Protean From Auto Unit (5:27 p.m. HK)

E-mobility company Bedeo has agreed to buy U.K. startup Protean Electric from Evergrande’s automotive unit.

The divestment by China Evergrande New Energy Vehicle Group Ltd. was announced in a Thursday statement from Bedeo that confirmed an earlier Bloomberg News report.

The deal helps Europe-focused Bedeo, which supplies light commercial vehicles and technology for zero emissions transport, expand into Asia and the U.S. Financial terms were not disclosed.

Wealth Product Guaranteed by Kaisa Misses Payment (4:46 p.m. HK)

Kaisa Group said a wealth management product it guaranteed missed a payment. The developer, together with the issuer Kaisa Finance, will work out a repayment plan for the product soon, it added. The developer said it faces “unprecedented” liquidity pressure but has continued to actively raise funds.

Concerns about the missed payment sent Kaisa Group’s 6.5% dollar note maturing in December down about 14.9 cents to 47.1 cents, according to Bloomberg-compiled prices.

Developer Bonds Tumble in Onshore Trading (3 p.m. HK)

Yuan-denominated property bonds joined the selloff in offshore junk-rated notes, triggering several intraday trading halts. Shanghai Shimao’s 3.6% yuan bond due 2023 finished down 10% at 68.17 yuan; it was halted earlier after tumbling 21%.

Any evidence contagion is spreading to the nation’s $12 trillion domestic credit market may prompt policy makers to take action to avoid a potential cash crunch. The central bank, which at the end of October injected almost 1 trillion yuan into the banking system, has been draining liquidity this week.

Dollar bonds Coupon due date Grace period ends Amount

(million dollars)

REVERE 9.5% due 2022 Oct. 11 Nov. 10 68.88
REVERE 10% due 2023 Oct. 11 Nov. 10 42.5
EVERRE 10.5% due 2024 Oct. 11 Nov. 10 36.75
TIANHL 13% due 2022 Nov. 6 Dec. 6 41.93
TIANHL 13.75% due 2023 Nov. 6 Dec. 6 40.56
EVERRE 7.5% due 2023 Dec. 28 Jan. 27 50.43
EVERRE 8.75% due 2025 Dec. 28 Jan. 27 204.77


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