Evergrande staves off second default in a week by paying US$45.2 million in overdue coupon before grace period runs out

·4-min read

China Evergrande Group has staved off a potential default for the second time in a week, after paying an overdue offshore bond coupon before a 30-day grace period runs out.

The Shenzhen-based developer paid US$45.2 million of coupon due on its 9.5 per cent, US$951 million bond that matures on March 29, 2024, according to people familiar with the matter. Evergrande missed the payment on September 29, and was given 30 days to comply before bondholders are entitled to declare it in default, a move which could trigger cross defaults across all its offshore debt, and in the worst case set the stage for creditors to petition for its liquidation.

Everegrande’s spokespeople did not respond to the Post’s requests for comment.

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Hui Ka-yan (centre), founder and chairman of China Evergrande Group, during a press conference in Hong Kong on 31 August 2015. Photo: SCMP.
Hui Ka-yan (centre), founder and chairman of China Evergrande Group, during a press conference in Hong Kong on 31 August 2015. Photo: SCMP.

It’s the second time that Evergrande has sailed close to the wind with investors and creditors. A week earlier, the developer wired US$83.5 million in overdue coupon payment to its trustee on the final working day before running out of a 30-day grace period.

Separately, the company’s wealth management unit paid the first 10 per cent of redeemed financial product before its October 30 deadline, according to investors.

The latest payments follow a tongue lashing this week by China’s National Development and Reform Commission (NDRC), the economic planning agency that oversees all offshore debt issuance in China. Evergrande was absent from the Beijing meeting, during which the NDRC lectured bond issuers such as Shimao Property Holdings and China Vanke to “optimise their foreign debt structure,” abide by “financial discipline and market regulations” and “strictly use the funds raised in accordance with their stated purposes,” according to the agency’s statement.

No. 8-10 Black's Link on The Peak in Hong Kong as of September 15, 2021, held in the name of Giant Hill, in which Evergrande’s founder Hui Ka-yan was the sole director before transferring the title on July 30 to his associate Tan Haijun. Photo: Xiaomei Chen.
No. 8-10 Black's Link on The Peak in Hong Kong as of September 15, 2021, held in the name of Giant Hill, in which Evergrande’s founder Hui Ka-yan was the sole director before transferring the title on July 30 to his associate Tan Haijun. Photo: Xiaomei Chen.

Hui Ka-yan, the founder of Evergrande and one of China’s wealthiest tycoons, had been struggling to sell assets to meet the company’s total liabilities, at more than US$300 billion. He reportedly pledged a mansion on The Peak in Hong Kong to China Construction Bank (Asia) as collateral for a HK$300 million (US$38.6 million) loan, according to data from the Land Registry.

Luck ran out elsewhere for the company, with a diverse range of businesses including banking, bottled water, real estate, electric cars, wealth management, and even a football club. A sale of Evergrande’s 26-storey office tower on the Wan Chai waterfront in Hong Kong fell through on October 15 when state-owned Yuexiu Property dropped its US$1.7 billion offer over concerns that Evergrande’s unresolved indebtedness would create potential complications. Five days later, a HK$20.04 billion offer to sell 50.1 per cent of Evergrande Property Services to Hopson Development Holdings failed to materialise in a dispute over the payment.

Sources: Evergrande. SCMP Graphics
Sources: Evergrande. SCMP Graphics

Evergrande is barely out of the woods, as more payment deadlines loom ahead. The company missed seven offshore interest payments totalling US$511.9 million on September 23, 29, October 11 and 24, triggering 30-day grace periods ending this month and next. It has two coupons totalling US$82.5 million due on November 6.

The company haled the redemption of its wealth management products on September 8, instead asking investors to receive their payments in 10-per cent quarterly instalments until the payment is complete.

On top of that, Evergrande is being pursued by suppliers from designers to construction companies and furniture vendors who said they had not been paid in months.

Real estate agents are also demanding payment, with two agencies in the Midland Realty network suing Evergrande to demand US$5.6 million of fees, while Centaline said it was owed HK$200 million from helping the developer sell its apartments in Hong Kong.

The developer is trying to amass enough capital to keep the lights on and complete its backlog of 1.3 trillion yuan in unfinished properties. In an attempt to assure nervous property buyers, Hui arranged a ceremony on September 1, during which he ordered senior executives to sign a collective pledge to complete all property projects on hand and deliver them to buyers on time.

This article Evergrande staves off second default in a week by paying US$45.2 million in overdue coupon before grace period runs out first appeared on South China Morning Post

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