Some Evergrande unit's offshore bondholders not paid interest due Nov 6, say sources

HONG KONG (REUTERS) – Some holders of United States dollar bonds issued by China Evergrande Group’s unit Scenery Journey have not received interest payments due on Saturday by Monday morning (Nov 8) in Asia, two sources familiar with the matter said.

The company was due to make semi-annual coupon payments on Saturday worth a combined US$82.49 million (S$111.4 million) on its 13 per cent November 2022 and 13.75 per cent November 2023 bonds.

Non-payment of interest by Nov 6 would have kicked off a 30-day grace period for payment. The company has narrowly averted defaults by paying previous coupons just before the expiration of their grace periods.

One such period expires on Wednesday, Nov 10, for more than US$148 million in coupon payments that had been due on Oct 11.

A spokesman for Evergrande did not immediately respond to a request for comment. The sources could not be named as they were not authorised to speak to the media.

Reuters was unable to determine whether Evergrande has told bondholders what it planned to do regarding the coupon payment due on Saturday.

Evergrande’s shares edged lower on Monday, finishing the morning down 0.9 per cent. They have fallen nearly 85 per cent this year. Duration Finance data showed the company’s dollar bonds continuing to trade at discounts of about 75 per cent from their face value on Monday.

Once China’s top-selling developer, Evergrande has been reeling under more than US$300 billion in liabilities, and its liquidity woes have reverberated across the country’s US$5 trillion property sector, prompting a string of offshore debt defaults, credit rating downgrades and sell-offs in the developers’ shares and bonds in recent weeks.

Spreads on Chinese corporate high-yield dollar debt widened to record highs on Friday, and on Monday Shanghai Stock Exchange data showed developers’ bonds once again dominating the list of the day’s biggest losers. One yuan bond issued by an onshore unit of Shimao Group was suspended from trade after falling more than 34 per cent.

Falls even extended to investment-grade names. Tradeweb data showed a 4.75 per cent January 2030 bond issued by a unit of Sino-Ocean Group Holding fell nearly 15 per cent on Monday to just above 75 cents. Sino-Ocean is rated “BBB-“ by Fitch Ratings and has a “Baa3” rating from Moody’s Investors Service.

Nomura economists Ting Lu and Jing Wang said in a note that they expected “much higher” repayment pressures on developers in the coming quarters, almost doubling from US$10.2 billion in the fourth quarter of 2021 to US$19.8 billion and US$18.5 billion in the first and second quarters of 2022, respectively.

“With the worsening property sector, we might see a rebound of defaults onshore by developers, and bond prices in onshore and offshore markets may increasingly impact one another as investors are on alert,” they said.

“We believe regulators are likely to step up efforts to avoid rising defaults in China’s (offshore commercial dollar bond) market.”

Regulators in October told developers to proactively prepare for repayment of both principal and interest on their foreign bonds and to “jointly maintain their own reputations and the overall order of the market.” 

More on this topic

Join ST’s Telegram channel here and get the latest breaking news delivered to you.

Source: Read Full Article