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Friday, December 03, 2021

China Evergrande wires funds for bond coupon, averting default

The source corroborated a story in the state-backed Securities Times on Friday that the company had remitted $83.5 million in coupon payments to a trustee account at Citibank on Thursday, allowing it to pay out to all bond holders before the grace period expires on Oct. 23.

By: Reuters | Hong Kong/shanghai |
October 22, 2021 5:17:27 pm
The logo of China Evergrande Group is seen on the company's headquarters in Shenzhen, Guangdong province, China, Sept. 26, 2021. (REUTERS/File Photo)

China Evergrande Group wired funds to a trustee account on Thursday for a dollar bond interest payment due Sept. 23, a source told Reuters on Friday, days before a deadline that would have plunged the embattled developer into formal default.

The source corroborated a story in the state-backed Securities Times on Friday that the company had remitted $83.5 million in coupon payments to a trustee account at Citibank on Thursday, allowing it to pay out to all bond holders before the grace period expires on Oct. 23.

“They seem to be avoiding short-term default and it’s a bit of a relief that they have managed to find liquidity,” said a Hong Kong-based restructuring lawyer representing some bondholders.

“But still, Evergrande does need to restructure its debt. This payment might be a way for them to get some sort of buy-in with stakeholders before the heavy work needed on the restructuring.”

Evergrande did not immediately respond to Reuters request for comment. Citi declined to comment.

News of the wired payment comes a day after financial information provider REDD reported on Thursday that the company had secured more time to pay a defaulted bond issued by Jumbo Fortune Enterprises and guaranteed by Evergrande.

A string of Chinese officials in recent days have sought to reassure investors, saying that creditors’ interests would be protected. Market participants nevertheless expressed shock at news of the payment.

“This is a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management Ltd, adding many had expected a default.

The news would boost bondholders’ confidence, he said, as “there are many coupon payments due ahead. If Evergrande pays this time, I don’t see why it won’t pay the next time.”

Evergrande missed two coupon payments on its dollar bonds on Sept. 23 and Sept. 29, starting the clock on 30-day grace periods for payment. Non-payment of interest for 30 days would result in a formal default by the company, and trigger cross-default provisions for other Evergrande dollar bonds.

Evergrande’s dollar bonds surged on Friday morning, with its April 2022 and 2023 notes jumping more than 10%, according to data provider Duration Finance.

Evergrande’s shares rose about 4%, a day after the resumption of trade following a more than two-week suspension pending the announcement of a scrapped stake sale in its property management unit.

The Hang Seng mainland properties index surged more than 5% in early trade, against a 0.13% rise in the broader Hang Seng index.

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