Evergrande saved from default again after bond coupon payment right before deadline

·2-min read
The property giant is struggling to tackle a debt worth billions  (Reuters)
The property giant is struggling to tackle a debt worth billions (Reuters)

China’s embattled developer Evergrande has managed to pull itself out of another default risk by paying for an overdue offshore interest payment right before the deadline, according to reports.

This is the second time this week that the real estate giant — which is tackling a massive debt of $300bn (£217bn) — has averted default due to unpaid coupons last month.

The company managed to pay $47.5m in coupon payments to bondholders for a US-dollar traded bond before the Friday deadline, saving itself from a formal default yet again.

Evergrande, which was once China’s second-biggest developer, missed two due dates for interest payment to its bondholders in September and paid $83.5m last week, at the last minute, for interest on an offshore bond.

The developer had a 30-day grace period, within which if it could not secure payments for the coupon, it would have plunged into default proceedings with all its $19bn (£13bn) worth of bonds in the international capital markets.

Recently, another Chinese developer, Modern Land, failed to pay interest and principal amount to bondholders and went into default amid a worrying crisis in the country’s infrastructure sector.

However, if Evergrande plunges into default, it could trigger a major crisis across Asian and international markets.

The company hasn’t yet issued a statement explaining the source of its funds. The cash-strapped company has been trying to stay on its feet with attempts to sell off stakes. However, so far it has only materialised one deal with a Chinese commercial bank it was in debt too.

Another deal with a rival developer, Hopson, fell through recently amid disagreements over terms of the contract, Evergrande announced on 20 October.

However, the company’s woes do not end here as it has nearly $338m (£245m) in other offshore coupon payments coming due in November and December.

Evergrande has been avoiding an expected default for months now since the company plunged under heavy debts over a year ago, with China imposing stringent laws on refinancing and rent control measures. The company has lost over 80 per cent of its stock value since then.

Its debts have snowballed into a major crisis for Chinese developers in what is expected to affect international markets as well. The real estate sector accounts for over one-fourth of China’s GDP.

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