Embattled Chinese property titan Evergrande Group (恆大集團) yesterday said that it has agreed on a deal with domestic bondholders that should allow the conglomerate to avoid missing one of its interest payments and avoid default, but its deeper debt burden remains.
In a statement to the Shenzhen Stock Exchange, Evergrande’s property unit Hengda Real Estate Group Co (恆大地產) said that it had negotiated a plan to pay interest due on its 232 million yuan (US$35.9 million) 2025 bond.
Evergrande has admitted facing “tremendous pressure” as it tackles a debt pile of more than US$300 billion, and has said it might not be able to meet its liabilities.
Photo: Reuters
The group has made no mention of its repayments on interest for an offshore bond due today. While that leaves open the chance it could miss payment on that, it would still have a 30-day grace period before it is deemed in default.
In yesterday’s statement, Hengda said that investors “who bought and held the bonds” before yesterday “are entitled to interest paid this time.”
Evergrande did not reply to requests for comment.
Analysts said the repayment would go some way to soothing anxious markets in the short term.
However, “for confidence to return more meaningfully, it will need the market to see sight of the broad restructuring plans for Evergrande,” Global CIO Office chief executive officer Gary Dugan told Bloomberg News.
Given the company’s debt pile, analysts and investors have speculated that the government would likely step in with some kind of help for the corporate giant, although Beijing has so far remained mute on the crisis.
Meanwhile, the vagueness of the filing — which did not give details on how much it would pay and when — left some warning that there remained a lot to overcome.
The payment announcement “is likely only a temporary reprieve with no signals from the Chinese government over what steps, if any, it will take to assist an orderly wind down or restructuring,” Oanda Corp analyst Jeffrey Halley said.
Nonetheless, news of the deal provided support to equities yesterday, with Shanghai leading most Asian markets up, even as traders returned from a long weekend break to play catch up with Monday’s global rout.
China’s central bank also injected 90 billion yuan into the banking system, in a sign of support as the country’s financial markets reopened and steadied after a two-day break for the Mid-Autumn Festival.
Despite the looming default, some funds have been increasing their positions in recent months. BlackRock Inc and investment banks HSBC Holdings PLC and UBS Group AG have been among the largest buyers of Evergrande’s debt, Morningstar data and a blog post showed.
Other bondholders include UBS Asset Management and Amundi SA, Europe’s largest asset manager.
Additional reporting by Bloomberg
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