Evergrande, faced with coupon payment deadline, sells bank stake to repay loan

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  • Evergrande faces Wednesday interest payment deadline
  • Bond Advisor expects Evergrande to miss deadline
  • The company sold a $ 1.5 billion stake in Shengjing Bank
  • Evergrande shares increase by up to 17%

HONG KONG, Sept. 29 (Reuters) – The cash-strapped China Evergrande group has left its offshore bondholders wondering if it will pay interest on a bond coupon due Wednesday despite its agreement to settle the debt with a Chinese bank in a $ 1.5 billion divestiture deal.

With liabilities of $ 305 billion, Evergrande has raised concerns that its woes could spill over into the Chinese financial system and reverberate around the world – a concern that has subsided with the Chinese central bank pledging to protect. the interests of home buyers.

Evergrande (3333.HK) said in an exchange brief that he would sell a 9.99 billion yuan ($ 1.5 billion) stake he owns in Shengjing Bank Co Ltd (2066.HK) to a state-owned asset management company.

The bank, one of Evergrande’s main lenders, demanded that all net proceeds from the sale be used to settle the developer’s debts with Shengjing. In the first half of last year, the bank had 7 billion yuan in loans to Evergrande, according to a report by brokerage firm CCB International, citing news reports.

The move highlights how Evergrande, once the best-selling developer in China and now set to be one of the biggest restructurings ever in the country, prioritizes domestic creditors over offshore bondholders. He also underlines the role that public companies can play in the outcome of Evergrande.

The company is due to make a bond interest payment of $ 47.5 million on its March 2024 9.5% dollar bond on Wednesday.

The company missed a dollar bond payment deadline last week, a day after its main real estate business in China said it had negotiated privately with onshore bondholders to settle a separate coupon payment on a bond denominated in yuan.

Evergrande’s silence on its offshore payment obligations has led global investors to question whether they will have to take significant losses at the end of the 30-day grace periods for coupon payments due on September 23 and 29.

An Evergrande spokesperson did not immediately respond to Reuters’ request for comment.

“We are in a wait-and-see phase at the moment. Creditors are organizing and people are trying to figure out how this falling knife could be caught,” said an adviser hired by one of the offshore bondholders of ‘Evergrande.

“They didn’t pay last week, I think they probably won’t pay this one. That doesn’t necessarily mean they won’t pay… they have the 30 day grace period,” he said. said the advisor. refusing to be named due to the sensitivity of the matter.

GOVERNMENT STEPS UP

Once the face of China’s frenzied construction boom, Evergrande has now become the face of a developer debt crackdown that has spurred volatility in global markets and left investors large and small to sweat their exposure.

Evergrande’s problems hit global stock markets earlier this month.

In the weeks that followed, some global investors focused on the political wrangling in Washington over the US debt ceiling and rising Treasury yields that put stocks under pressure.

Any negative surprises from Evergrande could give stock bears more ammunition.

Rating agency Fitch on Wednesday downgraded the default ratings of long-term foreign currency issuers (IDRs) of Evergrande and its subsidiaries, Hengda and Tianji, citing the likely non-payment of offshore bond interest last week.

Beijing is pushing state-owned companies and state-backed real estate developers such as China Vanke Co Ltd (000002.SZ) to buy some of Evergrande’s assets, people familiar with the matter told Reuters.

Authorities hope the asset purchases will avoid or at least alleviate social unrest that could arise if Evergrande were to suffer a disorderly collapse, they said, declining to be identified due to the sensitivity of the matter.

On Monday, China’s central bank pledged to protect consumers exposed to the real estate market, without mentioning Evergrande in a statement posted on its website, and pumped more liquidity into the banking system.

The moves have boosted investor sentiment towards Chinese real estate stocks over the past two days, with Evergrande stock rising 17% on Wednesday. The headline was up about 11% in afternoon trading.

Reporting by Clare Jim, Karin Strohecker, Donny Kwok; Written by Ira Iosebashvili and Sumeet Chatterjee; Editing by Stephen Coates

Our standards: Thomson Reuters Trust Principles.


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