By
Chimamanda U. Martha
October 17th, 2023
Some bondholders of Evergrande have not received coupon payments by the end of the 30-day grace period at the close of Asia business on Wednesday.
Evergrande Group, China’s second-largest real estate developer, has defaulted on $148 million worth of bonds after failing to pay it within the 30 day grace period, which ended 10th of November. Evergrande has been facing financial challenges as the company experiences a debt crisis. Since the real estate developer defaulted in its initial payment in October, investors were hoping to get the coupon payments within the extended period. The affected bonds are a 9.5% note due in the next year, 10% in 2023, and another 10.5% in 2024.
DMSA is preparing bankruptcy proceedings against Evergrande Group.
Evergrande Avoids Payments Default Again
Earlier today, according to various sources, some bondholders of Evergrande have not received coupon payments by the end of the 30-day grace period at the close of Asia business on Wednesday. However, before the end of the day, customers of international clearing firm Clearstream said they received some payment from Evergrande. A spokesperson for Clearstream explained that the customers received overdue payments on three US dollar bonds the real estate developer issued. Complementing the spokesperson comment, two investors who hold two of the bonds confirmed the payments from Evergrande.
If Evergrande had not made any payments, the matter would have resulted in its formal default. Also, failure to pay would have caused cross-default for other Evergrande dollar bonds. A source who is familiar with the matter commented on the Evergrande payments struggles:
“The near-term fix seems to be happening but there’s a long way to go before this issue gets sorted out. These are early days.”
As of the 8th of November, two holders of other dollar notes issued by a Unit of China Evergrande revealed that they had not received payments. Notably, the payments were for coupons which were officially due on the 6th of November.
Even has Evergrande tried to make some payments, the property giant is still struggling with debts. The company is still dealing with over $300 billion in liabilities, $19 billion of which are international market bonds.
China Property Sector Struggles
Generally, there are payments defaults across the whole property sector in China. While Evergrande is facing the largest-ever debt in the country, Fantasia Holdings Group also said it missed payments last month.
The central bank has decided to inject liquidity into the financial system. The bank aims to limit the ongoing difficulties in the property market. Despite this, the happenings in the property industry have pushed yields on junk dollar bonds from Chinese issuers to the highest of more than 24% in the last 10 years.
“Since the Evergrande crisis, investors have become more worried and focused about Chinese developer’s repayment ability,” said the head of equity business at Hong Kong brokerage CHIEF Securities Thomas Kwok.
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