Evergrande avoids default for 3rd time in a month with last minute cash scramble

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Cash-strapped developer China Evergrande Group once again averted a volatile default with last-minute bond payments, but the relief did little to ease tensions in the country’s broader property sector.

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A Clearstream spokesperson said Thursday that clients of international clearing firm Clearstream received overdue interest payments on a $3 bond issued by Evergrande.

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Evergrande, the world’s most indebted developer, has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, of which US$19 billion goes to foreign investors such as Clearstream. Bonds are held by investors.

The latest payments were made at the end of a 30-day grace period that ended Wednesday, and the third time in the past month the company has made payments alarmingly close to a deadline. The bonds were due to pay more than US$148 million in interest payments.

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Failure to pay would have resulted in a formal default by the company and triggered cross-default provisions for other Evergrande dollar bonds, triggering a debt crisis on the world’s second largest economy.

problems remain

Though the developer managed to avert the impending calamity, the debt wall of the country’s $5 trillion property sector showed no signs of coming to a halt.

A source with knowledge of the matter, referring to Evergrande, said, “There is a near-term resolution, but there is a long way to go before this issue is resolved. These are early days.” Talk to the media.

Evergrande did not respond to Reuters’ request for comment.

Bankers and analysts told Reuters that Beijing will stick to policies to curb over-borrowing by property developers, even as it makes changes to financing amid the industry’s liquidity crunch.

Next big payment due in December

Evergrande has total coupon payments of over $255 million as of December 28. It has come under pressure from its other creditors on the house and a staggering funding has cast a shadow over hundreds of its housing projects.

Investor attention is now shifting to other cash-strapped developers who have short-term offshore payments, including Casa Group.

look | Why the Evergrande crisis matters

How does it have the most offshore debt of any Chinese developer after Evergrande and this week appealed to creditors for help. It has coupon payments totaling more than $59 million on Thursdays and Fridays, with 30-day grace periods for both.

It was not immediately known whether Casa, China’s first asset company to default on foreign bonds in 2015, paid for the tranche on Thursday. It’s already missed payments on some at-home money management products.

The developer did not immediately respond to a Reuters request for comment.

asset bubble

While the US Federal Reserve warned this week that China’s turbulent asset sector could pose a global risk, there were no clear indications that Beijing would step up with a comprehensive, national plan to tackle the issue.

Chinese regulators in recent weeks, however, sought to reassure investors and home buyers that the risks were controllable and that excessive debt tightening by banks was being corrected.

Developers including Evergrande and Casa are also looking to sell some of their commercial assets in China and elsewhere to raise cash amid increasingly rising repayment obligations.

British electric motor maker Saieta said on Thursday it is acquiring electric powertrain company E-Traction from the automotive arm of Evergrande in a deal worth up to 2 million euros ($2.31 million).

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