Debt-laden Evergrande strikes deal with bondholders
By Abigail Townsend
Date: Wednesday 22 Sep 2021
(Sharecast News) - China's troubled Evergrande Group has eased immediate fears it is facing imminent default after negotiating a deal with bondholders.
The heavily-indebted property developer's Hengda Real Estate Group, its main unit, said it would settle a coupon payment due on Thursday on its Shenzhen-traded, 5.8% September 2025 bond.
The payment is thought to be around $36m.
It did not provide further details, however, other than to confirm the bond "has been resolved via negotiations off the clearing house". Nor did the statement refer to another interest payment, $83.5m on an offshore bond, which is also due on Thursday.
The uncertain future of Evergrande has unsettled markets worldwide in recent days, on fears that its collapse would have a significant impact on the wider Chinese economy.
The firm, which borrowed heavily to build its property portfolio, currently owns more than 1,300 projects in more than 280 cities in China. Other business interests range from ownership of leading football team Guangzhou FC to wealth management and food manufacturing.
It now has debts of around $300bn. But last year Beijing, concerned about the country's property market over-heating, tightened rules controlling the amount owed by real estate developers, prompting Evergrande to offer its properties at major discounts to bolster cashflow.
Russ Mould, investment director at AJ Bell, said: "Having seen some very bad days for equities in recent sessions, Europe and parts of Asia were more upbeat on Wednesday. China's SSE index jumped back to life after markets were closed for a few days' holiday.
"One key event is Evergrande striking a deal over a bond repayment, thereby bringing a sense of relief to markets we might not see the business collapse - something that could cause ripples in multiple markets. Evergrande still has plenty of problems to fix, but today's deal would suggest catastrophe is not immediately around the corner."
Rabobank noted: "Sentiment has been further supported by the news that interest payments falling due on Evergrande CNY-denominated bonds tomorrow had been 'resolved via negotiations off the clearing house'.
"It is hard to discern exactly what this means, as it could conceivably include an agreement with creditors to defer payment, to pay instalments or to do so in kind. As a result, this looks to be positive only in so far as a de jure, but not de facto, default appears to be avoided. It also leaves the issue as to whether the company will pay the $83.5m of interest that also falls due tomorrow."
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