Evergrande averted collapse, but sector debt concerns remain
Evergrande Group, a cash-strapped property developer in China, avoided a destabilizing collapse for the third time in the preceding month. On Thursday, a source said that some bondholders received late coupon payments.
The world’s most indebted property developer, Evergrande, has been falling between deadlines in recent weeks as it engages with more than $350 billion in liabilities, including $18 billion of international market bonds.
Cailianshe, a media outlet in China, reported that some bondholders have already received interest payments that were supposed to be ready for the last month. It had a total of more than $149 million. The company made its payments on Wednesday, at the end of a 30-day grace period. The same thing happened with two separate offshore coupon payments expected at the end of September. For them, the grace periods ended at the end of last month. A complete failure to pay would have resulted in a formal collapse by the company, increasing a debt crisis threatening the world’s second-largest economy that has confused global markets. The near-term fix appears to be happening, but many things must be done before this issue gets sorted out. Evergrande, at the center of a deepening liquidity squeeze in the property sector, avoided responding to Reuter’s request for comments on its recent bond coupon payment.
Besides, the developer managed to avoid a complete failure again.
Evergrande has another coupon payment of more than $260 million by the end of December. It has come under pressure from its creditors in China, while an oppressive funding squeeze added a shadow over its residential projects.
Investor focus is now changed and directed to other cash-strapped developers, including Kaisa Group, with a series of offshore payments for the short term.
Another Chinese developer, Kaisa, comes after Evergrande in terms of offshore debt. It has coupon payments of over $58 million scheduled for Thursday and Friday this week. It has already missed payments on some wealth management products in China. The developer avoided immediate response to Reuter’s request for comments.
This week the U.S. Federal Reserve warned troubled property sector in China might pose global risks. However, there were no clear indications of if Beijing is willing to step in with a larger, national plan to address the issue. However, Chinese regulators have sought to convince Chinese homebuyers and investors that risks were controllable in recent weeks.