China Evergrande braces for payment deadline after doubting availability of funds

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A traffic light is seen near the headquarters of the China Evergrande group in Shenzhen, Guangdong province, China on September 26, 2021. REUTERS / Aly Song

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HONG KONG, Dec.6 (Reuters) – After wobbling from one deadline to the next, China Evergrande Group (3333.HK) is once again on the brink of default, with pessimistic comments from the property developer raising expectations for a direct state involvement and managed debt restructuring. .

After making three 11-hour coupon payments in the past two months, Evergrande will again face the end of a 30-day grace period on Monday, with dues this time of $ 82.5 million.

But a statement Friday night that creditors had demanded $ 260 million and that he could not guarantee enough funds to repay the coupons prompted authorities to summon its president – and wiped out an eighth of the value trading in its shares on Monday.

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Evergrande was once the best-selling developer in China, but is now saddled with over $ 300 billion in liabilities, meaning a collapse could spill over to the real estate industry and beyond.

Friday’s statement was followed by authorities in his home province, Guangdong, saying they would send a task force to Evergrande at the developer’s request to oversee risk management, strengthen internal control and maintain the operations.

The central bank, the banking and insurance regulator and the securities regulator have also issued statements, saying the risk to the wider real estate sector could be contained.

The short-term risk of a single real estate company will not jeopardize market funding in the medium to long term, the People’s Bank of China said. Home sales, land purchases and financing “are already back to normal in China,” he said.

Analysts said the authorities’ concerted efforts have indicated that Evergrande has likely already entered a process of managed debt restructuring to reduce systemic risk.

Morgan Stanley in a report said such a process would involve coordination between authorities to keep real estate projects running smoothly and negotiations with onshore creditors to secure funding for development and completion of the projects.

Regulators would also likely facilitate debt restructuring talks with offshore creditors once business operations begin to stabilize, the U.S. investment bank said.

The November 2022 Evergrande bond – one of two bonds that could default for non-payment on Monday – was trading at the troubled price of 20.787 cents US to the dollar on Monday, down from 20.083 cents on Friday night.

Its stock price fell more than 12% to HK $ 1.98 ($ 0.2540), its lowest since May 2010.

($ 1 = 7.7965 Hong Kong dollars)

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Reporting by Clare Jim; Editing by Anne Marie Roantree and Christopher Cushing

Our standards: Thomson Reuters Trust Principles.


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