WRAPUP 1-China Evergrande offshore investors face ‘large losses’ after second payment miss

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SHANGHAI/BEIJING, Sep 30 (Businesshala) – China Evergrande Group defaulted on paying bond interest due on Wednesday, two bondholders said, its second unpaid offshore loan payment in a week, though the cash-strapped company could meet its obligations. scrambling to do. Market.

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After missing $83.5 million in coupon payments last Thursday, the company, under a pile of $305 billion in debt, was due on Wednesday to make a $47.5 million bond interest payment on its 9.5% March 2024 bond.

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With liabilities as high as 2% of China’s GDP, Evergrande has raised concerns that its crisis could rip through the financial system and spread around the world, despite the central bank vowing to protect homebuyers’ interests. Anxiety has reduced somewhat after eating.

However, the developer’s silence on its offshore payment obligations has left global investors wondering whether they will ingest larger losses when the 30-day grace period ends for coupons, which were due on September 23 and 29. .

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Some offshore Evergrande bondholders had received neither interest payments nor any communications by the end of Wednesday’s New York time, said people familiar with the matter, who declined to be identified due to the sensitivity of the issue.

An Evergrande spokesperson did not immediately comment. Businesshala was unable to determine whether Evergrande has told bondholders what it plans to do regarding coupon payments on Wednesday.

The two missed offshore payments come as the company, which has nearly $20 billion in offshore debt, faces a deadline next month on bond coupon payments totaling $162.38 million.

Evergrande, once China’s best-selling developer, is now expected to be one of the biggest restructurings in the country. It has been prioritizing its onshore liabilities amid concerns about its troubles triggering social unrest.

Alexander Aitken, a partner at Herbert Smith Freehills, said, “I can’t see why offshore bondholders rather than onshore banks are inclined to deliver a better outcome, let alone home buyers and those lending onshore through personal loan structures. ” in Hong Kong.

“Of course being legal offshore also has structural subordination, meaning that Evergrande’s onshore subsidiaries are paid to lenders before lenders to the parent company or any offshore loan issuers.”

resume construction

Beijing’s direct intervention to resolve Evergrande’s crisis in the form of a bailout is unlikely, but analysts say it is wary of a messy collapse that could fuel unrest by local investors, suppliers and home buyers.

Authorities have prompted government-owned firms and state-backed property developers to buy some Evergrande properties in recent days to mitigate such risks.

Some instant messaging groups here had used money by Evergrande to organize protests and discuss claims that have been blocked on Tencent Holdings’ WeChat platform, group members said on Wednesday. said on Wednesday.

Evergrande said on Wednesday it would sell a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank Co Ltd to a state-owned asset management company.

The bank, one of Evergrande’s main lenders, demanded that all net proceeds from the sale go toward settling the developer’s debts with Shengjing, which had 7 billion yuan in debt to Evergrande in the first half of last year.

Separately, Evergrande’s Pearl River Delta business said in a WeChat post on Tuesday that about 20 developments in the area have resumed construction. The Post showed construction photos of various sites, and said the resumption of work had accelerated as Evergrande vowed to deliver the home to buyers at the beginning of the month.

Its main onshore arm, Hengda Real Estate Group, announced the resolution of an onshore bond coupon payment through “private negotiations” on 23 September.

Shares of Evergrande opened sharply on Thursday, rising as much as 5.21%, before reversing course, falling as much as 7.17%. The stock lost 5 per cent in afternoon trade.

“Regardless of how the debt is restructured, Evergrande shareholders and investors will suffer major losses on offshore, USD-denominated corporate bonds,” Jing Sima, chief China strategist at BCA Research, said in a note. ($1 = 6.4641 Chinese Yuan) (Reporting by Anne Marie Roantree, Claire Jim, Alun John and Donny Kwok in Hong Kong, Xiao Han in Beijing, Andrew Galbraith in Shanghai; Writing by Sumeet Chatterjee; Editing by Christopher Cushing, Gerry Doyle and Kim Coghill )

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