Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Evergrande domestic debt deal calms immediate contagion concern

EconomySep 22, 2021 11:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A vehicle drives past unfinished residential buildings at Evergrande Oasis, a housing complex developed by Evergrande Group, in Luoyang, China September 16, 2021. REUTERS/Carlos Garcia Rawlins/File Photo 2/2

By Anshuman Daga and Andrew Galbraith

SINGAPORE/SHANGHAI (Reuters) - China Evergrande agreed to settle interest payments on a domestic bond on Wednesday, while the Chinese central bank injected cash into the banking system, temporarily soothing fears of imminent contagion from the debt-laden property developer.

Evergrande, Asia's biggest junk-bond issuer, is so entangled with China's broader economy that its fate has kept global stock and bond markets on tenterhooks as late debt payments could trigger so-called cross-defaults.

Many financial institutions have exposure to Evergrande through direct loans and indirect holdings, while any defaults will also trigger sell-offs in the high-yield credit market.

In an effort to reassure investors, the People's Bank of China's injected 90 billion yuan to the banking system, signalling support for markets as they braced for what is expected to be one of China's largest-ever debt restructurings.

Evergrande is scrambling to avoid defaulting on a number of bonds with payments due this week and its main unit, Hengda Real Estate Group, said on Wednesday it had "resolved" one coupon payment due on Thursday on its Shenzhen-traded 5.8% September 2025 bond, via "private negotiations".

It did not specify how much interest would be paid or when, nor did Hengda mention Evergrande's other pressing debts, leaving it unclear what this means for $83.5 million in dollar bond interest payments due on Thursday.

Evergrande did not immediately respond to questions about its deal or its intentions.

But engagement with bondholders, a common way to avoid default, on top of chairman Hui Ka Yuan's vow this week that Evergrande would "walk out of its darkest moment," cheered investors and soothed markets more broadly.

"These events seem to suggest that the company is taking control of the situation and is trying its best to work out a solution with creditors," Singapore-based Dexter Tan, a senior fixed income analyst at Bondsupermart.com, said.

Evergrande, which epitomised the borrow-to-build business model and was once China's top-selling developer, also has a $47.5 million dollar-bond interest payment due next week.

"We do not have a clearer picture as how Evergrande settled its onshore coupon," Singapore-based Chuanyi Zhou, a credit analyst at Lucror Analytics, said.

"It doesn't look like a cash payment. It may still miss the coupon on offshore bonds due tomorrow."

Evergrande's woes have seen its shares fall 85% this year. The concerns have reverberated throughout China’s property market.

Shares of R&F Properties and Sunac China have both slumped around 50% year-to-date, Shimao is down more than 40% and Country Garden and Greenland Holdings have shed 30% and 20%, respectively.

Evergrande's Hong Kong shares did not trade due to a public holiday but rose 40% in Frankfurt to 0.38 euros ($0.45).

Its dollar bonds maturing next year and in 2024 remained below 30 cents on the dollar.

In the wider market, the U.S. dollar slipped while the S&P 500 rebounded from recent losses. (N)

BREAKDOWN

Analysts have been downplaying the risk that a collapse threatens a "Lehman moment", or liquidity crunch, which freezes the financial system and spreads globally.

Only some $20 billion of $305 billion outstanding debts is owed offshore, according to Refinitiv data.

But the risk of failure remains high, particularly if offshore bondholders are less willing than those in China to cut deals, and the fallout has already begun to trigger tremors in the property market of the world's second-largest economy.

“There are now comparisons being made between Evergrande with the collapse (of) Lehman Brothers and the crash in the U.S. housing market, with many analysts dismissing this comparison,” wrote Sebastien Galy of Nordea Asset Management in a recent note. “The reality is that it will take weeks to figure out the impact on growth given the impact on the real estate market.”

There is also mounting political pressure to act as the anger of retail investors with their savings sunk in Evergrande properties or wealth management products swells.

Asked at a regular daily briefing on Wednesday whether China would take measures to intervene, foreign ministry spokesman Zhao Lijian only referred to the "responsible departments".

Some funds have been increasing their positions in recent months. BlackRock (NYSE:BLK) and investment banks HSBC and UBS have been among the largest buyers of Evergrande's debt, Morningstar https://www.morningstar.hk/hk/news/215418/whos-buying-evergrandes-bonds.aspx?lang=en-hk data and a blog post showed.

Other bondholders include UBS Asset Management and Amundi, Europe's largest asset manager.

Still, many market participants believe the fallout from Evergrande is likely to be contained.

"Despite the worry, so far this looks like a corporate bankruptcy and not something worse," said Brad McMillan, chief investment officer for Commonwealth Financial Network in a recent note. "It’s a big one, to be sure, but one that can be handled within the system."

(Corrects spelling of analyst name in paragaph 11)

Evergrande domestic debt deal calms immediate contagion concern
 

Related Articles

Logitech quarterly sales rise on work-from-home boom
Logitech quarterly sales rise on work-from-home boom By Reuters - Oct 25, 2021

(Reuters) -Logitech International SA reported on Tuesday an increase in its sales in the second quarter as the computer peripherals maker continued to see a surge in demand for...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (16)
Fong SH
Fong SH Sep 22, 2021 11:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This meltdown news, to me, doesn't seems real at all, no banks or regulators will ever approved a loan or anything financial backups unless you're really soundly backup. As the world is concentrating of how ugly, how big this loss is go to be, the China RMB currency have been strengthening since, from USD1 = RMB6.80++ to now, presently USD1 = RMB6.45-- or below, reducing holdings on USD Bonds, increasing oil reserves & other commodities reserves. Just a reminder, the originator or SUN TZE art of war where the rest of world was, & still using, what do you think? Cheers, take care when outdoors, wear a mask, stay healthy.
Fong SH
Fong SH Sep 22, 2021 11:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The truth is, nobody knows nor understand what is going on inside China's  regulators' decisions. Everyone is just predicting, presuming without assurances. Taking this opportunities on news to trade in this volatile markets. I've worked 8++ years in Shanghai in the past, I had never understand their decisions sometimes, they're really amazing businessmen, lots of surprises. lol Though, but, I've learnt one unique terms with them, Guangxi - means affiliates, they are really closely knitted. That is why the western world called them pirates, crooks & scams, when you really don't understand them at all. To me, that's good, it's patriotic to their mother-nation, that's national service.
Stephen Smith
Stephen Smith Sep 22, 2021 4:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
A teetering Chinese real estate developer unexpectedly struck an 11th-hour deal to pay some of what it owes to its domestic investors on Wednesday, but foreign investors still owed millions of U.S. dollars on Thursday have so far been left hanging. Investors around the world have been watching property developer Evergrande Group closely this week, as the company is in danger of defaulting under its crushing debt load. https://worldabcnews.com/evergrande-strikes-deal-to-meet-chinese-bond-payment-but-foreign-dollar-investors-still-up-in-air/
Mox Mox
Mox Mox Sep 22, 2021 3:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China is too big to fail. the US will bail them out, don't worry
Eloy Rodrigo
Eloy Rodrigo Sep 22, 2021 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
As I said, more money... money, money, money, and more and more. But they can't print Gold.
Thanos theBear
Thanos theBear Sep 22, 2021 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
gold is stagnate. bitcoin is the answer
Mox Mox
Mox Mox Sep 22, 2021 7:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanos theBear wait until real fear arrives
Nordin Mohamad
Nordin Mohamad Sep 22, 2021 7:44AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
look like they are just buying time for next few months before the reality kick in....
Dave Jones
Dave Jones Sep 22, 2021 4:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
extend and pretend
Travel Club
Travel Club Sep 22, 2021 2:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FED OUTCOEE will be positive or negative
Travel Club
Travel Club Sep 22, 2021 2:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
OUTCOME
perplexed76 .
perplexed76 . Sep 22, 2021 2:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Travel Club  comingout
Chris Johnson
Chris Johnson Sep 22, 2021 2:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Kicking the can down the road... Nothing else
Trading Life Stlye
Trading Life Stlye Sep 22, 2021 12:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the article didn't say anything about the 80 million dollar interest payment due this Thursday. just there onshore bond payment to local banks and contractors. so everything is still in play. this is just a band-aid on a wound that needs stitches.
Vv Pp
Vv Pp Sep 22, 2021 12:37AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I love capitalism 🤣🤣🤣
milena villa escobar
milena villa escobar Sep 22, 2021 12:37AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Got a better idea.  Nooooooo
elias skaff
elias skaff Sep 22, 2021 12:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
zombie company fed on dead banks and financial system. I can't understand how company reached $300 billion in debt, and how they succeeded in issuing more bonds, who is lending this company? crazy market.
John Cerniuk
John Cerniuk Sep 21, 2021 11:24PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
too much leverage. credit system needs an enema
ron king
ron king Sep 21, 2021 11:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
imagine that. after you and market makers induce masd fear and panic sell offs, the already swooped in and bought retails shares. you and your fear is pathetic.
Robert gregg
Robert gregg Sep 21, 2021 11:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Kicking the can… 35 mil payment with 300bil debt?
Shyam Sundar Bhaiya
Shyam Sundar Bhaiya Sep 21, 2021 8:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Where has the money gone? Can somebody enlighten me?
Li Rui
Li Rui Sep 21, 2021 8:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
large chunk to land purchases
Li Rui
Li Rui Sep 21, 2021 8:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
large chunk to land purchases
Ian Chew
Ian Chew Sep 21, 2021 8:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Salary and bonus payments to high rank officials in the company…
Nordin Mohamad
Nordin Mohamad Sep 21, 2021 8:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
buy land and payment on others at inflated price from ccp...??
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email