Evergrande faces US$366 million of interest payments before year-end even after narrowly averting default on overdue coupons

·5-min read

China Evergrande Group is facing another US$366 million in interest payments on its onshore and offshore debt – some already overdue – by the end of this year, after narrowly staving off default once again with a series of last-minute coupon payments on Wednesday.

It is just a small portion of the cascading amount of debt payments set to come due in the coming months for the world’s most indebted property developer.

The Shenzhen-based company has 1.97 trillion yuan (US$308 billion) in total liabilities, with some 240 billion yuan in borrowings that have to be paid by next June.

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On Wednesday, Evergrande made overdue interest payments on three of its US-dollar-denominated bonds ahead of the end of a 30-day grace period after missing coupon payments of US$148 million due last month, according to people familiar with the matter.

Customers of Clearstream, an international central securities depository based in Luxembourg, also received payments on the dollar-denominated Evergrande bonds on Wednesday, according to a Clearstream spokesperson.

Evergrande declined to comment on Thursday.

The company has missed several interest payments on its offshore debt since late September, but managed to avoid a default so far by making interest payments just ahead of the end of grace periods on those bonds.

However, Evergrande is far from out of the woods as its seeks to sell assets and offload properties to try to keep ahead of its repayment schedule.

The company raised US$144 million in recent days by further selling down its stake in internet company HengTen Networks Group.

Bond coupon payment deadlines for China Evergrande

Date

Amount (US$m)

Type

Maturity date

Sep 23, 2021

17.9

Onshore

September 2025

Sep 23, 2021

83.5

Offshore

March 2022

Sep 29, 2021

45.2

Offshore

March 2024

Oct 11, 2021

68.9

Offshore

April 2022

Oct 11, 2021

42.5

Offshore

April 2023

Oct 11, 2021

36.8

Offshore

April 2024

Oct 19, 2021

9.4

Onshore

October 2025

Oct 24, 2021

115

Offshore

October 2022

Oct 24, 2021

120

Offshore

October 2023

Oct 27, 2021

44.4

Onshore

April 2026

Nov 6, 2021

41.9

Offshore

November 2022

Nov 6, 2021

40.6

Offshore

November 2023

Nov 6, 2021

72.7

Onshore

May 2023

Nov 6, 2021

26.3

Onshore

May 2024

Nov 26, 2021

18.3

Onshore

May 2023

Dec 5, 2021

10.8

Onshore

June 2023

Dec 28, 2021

50.4

Offshore

June 2023

Dec 28, 2021

204.8

Offshore

June 2025

Jan 22, 2022

57.5

Offshore

January 2023

Jan 22, 2022

60

Offshore

January 2024

Jan 7, 2022

44.3

Onshore

July 2022

Jan 8, 2022

24.3

Onshore

January 2023

Sources: Evergrande, SCMP Research

Evergrande held a majority stake in HengTen as recently as January, but has reduced its stake to 20.82 per cent through a series of sales this year, according to regulatory filings with the Hong Kong stock exchange.

This week, Hui Ka-yan, Evergrande’s chairman, also mortgaged his own luxury house on The Peak in Hong Kong, the city’s most expensive address, according to reports in the Chinese media. It is unclear how much Hui received, but the market value of the 5,433 sq ft home is HK$800 million (US$102.7 million).

The fundraising comes as Evergrande faces another deadline in early December to make US$82.5 million in overdue interest payments on offshore debt it missed last week, as well as another US$29 million in coupon payments on its onshore debt between now and December 5.

The latest payments by Evergrande came as property-related loans in the mainland rose last month, signalling a possible step back by the central government on its tightening stance.

Evergrande chairman Hui Ka-yan. Photo: Getty Images
Evergrande chairman Hui Ka-yan. Photo: Getty Images

As part of its efforts to stem speculative property bubbles, Beijing implemented “three red lines” measures last year that made it more difficult for overleveraged developers to take out bank loans, cutting off an important source of liquidity for the property sector.

Personal home loans in China rose by about 1 per cent to 37.7 trillion yuan in October from the prior-year period, according to the People’s Bank of China.

That also represented a 101.3 billion yuan increase over September, when home sales fell sharply as buyers were spooked by distress among mainland property developers.

Meanwhile, the Securities Journal, published by China’s state media Xinhua, said on Wednesday that banks’ loans to developers rose sharply in October.

On Thursday, S&P Global Ratings downgraded Kaisa Group Holdings and Agile Group over concerns about their access to liquidity and weakening sales.

“We downgraded Kaisa because the company’s liquidity appears to be depleted,” S&P said as it cut Kaisa’s rating to CCC- from CCC+. “Therefore, we believe non-payment risk is high and could ultimately lead to debt restructuring. A default scenario is inevitable within the next six months.”

S&P forecast this week that home sales in China are likely to fall by 10 per cent in 2022 and another 5 per cent to 10 per cent in 2023, marking the first multi-year sales decline in the private home market’s history in the mainland.

This week, the US Federal Reserve also warned that stress in China’s property sector could pose risks to the American financial system, given the size of China’s economy and its extensive trade links to the rest of the world.

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