China’s Evergrande to miss another bond payment this month

Key Takeaways:

• China’s Evergrande missed a second bond coupon payment in two weeks on Wednesday.
• The company sold $1.5 billion stake in Shengjing Bank as its stock squeezed up by 17%

NEW DELHI (CoinChapter.com) — China’s troubled real estate giant Evergrande Group missed a second bond coupon payment on Wednesday, its second default in two weeks. The company, which has become the world’s most indebted developer, has missed payments to retail debtholders, suppliers, and banks as well.

The Evergrande Group is struggling to make payments on debts to the tune of $305 billion. As such, concerns over the firm’s collapse creating shockwaves through China’s financial system and the world are high. Offshore debts account for nearly $20 billion of its $305 billion debt.

The firm needed to pay $47.5 million in interest payment on its 9.5% March 2024 dollar bond, which was due on Wednesday. Last Thursday, Evergrande defaulted an $83.5 million coupon on another bond.

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.

an adviser hired by offshore bondholders. Source: Reuters

Investors told Nikkei Asia that the bondholders have started consulting with advisers to form a committee to press their claims with Evergrande.

Related: Growing Bitcoin US stocks correlation amid Evergrande selloff disputes BTC’s digital gold narrative

Evergrande’s silence on failure to make coupon payments has left global investors worried about huge losses once the 30-Day grace period ends for the coupons due on Sep 23 and Sep 29.

Updates On Evergrande Fiasco

At one time, Evergrande was the spearhead of China’s building boom. However, the real estate firm’s default on its massive debt slammed global stock markets in early Sept, with aftershocks affecting the crypto markets too.

In an exchange filing on Wednesday, Evergrande had announced it would sell a 9.99 billion yuan ($1.5 billion) stake in owns in Shengjing bank to a state-owned asset management company. The bank demanded all net proceeds from the sale go towards settling Evergrande’s debts with Shengjing.

The transaction highlights the pressure on Evergrande to pay down its debts, considering the firm’s original stake in Shengjing bank was one of its most valuable ($2.8 billion) financial assets. Moreover, the sale also shows Evergrande is prioritizing domestic debtholders over offshore ones.

Last week, the firm’s main property business announced it had negotiated with onshore bondholders to settle a coupon payment on a yuan-dominated bond.

Evergrande made no statement on the missed bond payments. However, Hengda Real Estate, the firm’s mainland operating unit, shared in a WeChat post that work had resumed at more than 20 development projects. Evergrande halted nearly 400 projects as it could not pay suppliers and contractors.

Though global investors are now focused on the U.S debt ceiling and the rise in Treasury yields, any negative signs from the Chinese firm would impact the stock markets.

Meanwhile, rating agency Fitch reduced Evergrande’s credit rating to just one level above the default level. Scrutiny of Evergrande’s obligations is also heating up as Singapore’s financial regulator enquires about exposure risks from its banks.

Government Intervention

China’s central bank injected more cash into the banking system on Monday. The move followed its promise of protecting consumers exposed to the housing market. As a result, investor sentiment towards Chinese property stocks improved, with Evergrande rising as much as 17% on Wednesday.

Moreover, the Chinese government is pushing state-owned firms and property developers to purchase some of Evergrande’s assets. A report by Bloomberg said Marathon Asset Management, U.S based investment manager, would buy debts issued by the Evergrande group.

The government hopes that asset purchases would help reduce any unrest from investors should Evergrande suffer a messy collapse.