Too little, too late? Evergrande’s winding restructuring focuses on asset sales after avoiding defaults

File Photo: Crane stands at a construction site near the headquarters of the China Ever Grande Group in Shenzhen, Guangdong Province, China, on September 26, 2021.Reuters / Ally Song / File Photo

October 22, 2021

By Anshuman Daga and Scott Murdoch

Singapore / Hong Kong – Last-minute bond interest payments this week were said by developers, analysts, and lawyers, unless the China Evergrande Group restructures its debt pile in an orderly manner and strengthens asset sales.

Unexpectedly, Evergrande wired a $ 83.5 million coupon payment for offshore bondholders a few days before the 30-day grace period ended on Saturday, anyone who knows the issue directly. Said on friday.

Once China’s best-selling real estate developer, Evergrande has more than $ 300 billion in debt, with real estate sales down 30% in the year to October 20 and shorter-term coupon payments. I have deep doubts about whether I can do it.

John Han, a partner at Hong Kong law firm Kobre & Kim, said:

“This just shows that the house isn’t ready for a complete collapse due to the large cross-default cascade. It takes time for the next plan,” Han said. Told.

From November 1st to December 28th, Evergrande faces outstanding unpaid and offshore bond coupon payments totaling nearly $ 340 million.

Developers have nearly $ 20 billion in offshore debt.

“Evergrande still has a lot of debt to repay in the short term in the future, and there are clear signs of improvement in fundamentals such as (housing) sales,” said Kenny Ng, an analyst at Everbright Sun Hung Kai. No, “he said. “At the same time, the current price of Evergrande bonds still reflects a lack of confidence in the market for its future,” he said. Evergrande’s share price rose 4.3% on Friday, but has fallen 82% so far this year. Bond prices surged by more than 10% in April 2022 and April 2023, and dollar bond prices rose, according to duration finance data.

“Sales of (property) service units failed and sales in September and October were getting worse,” said Castor Pang, Head of Research at Core Pacific. “There is almost no cash.”

Nomura credit analyst Iris Chen said it would be difficult to fully understand the logic behind the latest payments unless Evergrande could pay more coupons until mid-November.

Chen called Evergrande’s default inevitable, “I think it’s actually better for companies to default early rather than later to prevent repayment of onshore debt using offshore assets.” Said.

Evergrande officially abandoned its plans to sell $ 2.6 billion in shares in one of its major units on Wednesday.

Evergrande’s main unit said on Friday that no substantial progress had been made in disposing of the developer’s assets.

Hengda Real Estate Group Co said in a statement posted on the Shenzhen Stock Exchange website that it cannot guarantee that China’s Evergrande Group will continue to meet its contractual financial obligations.

“Depending on the policies implemented by the government, multiple funding channels are effectively closed to developers. To reopen these channels, investors assume that these companies are continuing companies. We have to believe that we can sustain it, “said Paul Lukaszewski, Head of Corporate Debt in the Asia-Pacific region.

“This means that they (real estate developers) need to have ample access to their own cash flow and refinancing options to deal with their debt when it expires. “I will.”

(Report by Anshuman Daga in Singapore and Scott Murdoch in Hong Kong, additional report by Clare Jim, edited by Sumeet Chatterjee and Kim Coghill)

Too little, too late? Evergrande’s winding restructuring focuses on asset sales after avoiding defaults

Source link Too little, too late? Evergrande’s winding restructuring focuses on asset sales after avoiding defaults

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