HONG KONG, RAW – At least some of China Evergrande’s offshore bondholders have not received a due coupon payment by the close of business, sources say, although the cash-strapped developer reached a $US1.5 billion ($A2.1 billion) deal to settle debt with a Chinese bank.
With liabilities of $US305 billion, Evergrande has sparked concerns its woes could spread through China’s financial system and reverberate around the world – a worry that has eased with the Chinese central bank vowing to protect homebuyer interest.
The company, which has nearly $US20 billion in offshore debt, was due on Wednesday to make a $US47.5 million bond interest payment on its 9.5 per cent March 2024 dollar bond.
It also missed paying a $US83.5 million in coupon on another bond last Thursday.
Two people familiar with the matter, who declined to be named due to the sensitivity of the matter, said at least some of the holders of the 2024 bonds had received no information from Evergrande about the payment on Wednesday.
It was not immediately clear if the payment could still be made during US business hours.
Reuters was unable to determine whether Evergrande had told any of the bondholders what it plans to do about Wednesday’s coupon payment.
Evergrande’s silence on its offshore payment obligations since the missed payment last week has left global investors wondering if they will have to swallow large losses when 30-day grace periods end for coupons due on September 23 and September 29.
The company, once China’s top-selling developer and now expected to be one of the largest-ever restructurings in the country, has been prioritising domestic creditors over offshore bondholders.
For Evergrande, “the most likely outcome is debt restructuring with some help from the government,” said Wai Hoong Leong, portfolio manager for the KraneShares Asia Pacific High Yield Bond ETF, in a presentation to investors on Wednesday.
“We expect the government and Evergrande to focus on protecting the customers and suppliers while ensuring an orderly restructuring for creditors who are likely to take a larger impact.”
It missed the payment deadline on a US dollar bond last Thursday, a day after its main property business in China said it had privately negotiated with onshore bondholders to settle a separate coupon payment on a yuan-denominated bond.
In the latest such move, Evergrande said in an exchange filing earlier on Wednesday that it would sell a 9.99 billion yuan ($A2.1 billion) stake it owns in Shengjing Bank Co Ltd to a state-owned asset management company.
The bank, one of Evergrande’s main lenders, demanded all net proceeds from the sale go towards settling the developer’s debts with Shengjing.
As of the first half last year, the bank had 7 billion yuan in loans to Evergrande, according to a report by brokerage CCB International, citing news reports.
The move highlights the role state-owned enterprises may play in Evergrande’s denouement.
“We are in the wait-and-see phase at the moment. The creditors are organising themselves and people are trying to figure out how this falling knife might be caught,” said an adviser hired by one of the offshore Evergrande bondholders.
“The clock has started to tick on a restructuring process. The company is going to need to do something, it’s obviously struggling with liquidity … the liquidity issue is what brings the house of cards down.”
Rating agency Fitch on Wednesday downgraded the long-term foreign-currency issuer default ratings (IDRs) of Evergrande and its subsidiaries Hengda and Tianji, citing likely non-payment of offshore bond interest last week.