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Business

China developers’ bonds, shares hit again by Evergrande contagion worries

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SHANGHAI, Oct 13 (Reuters) – Shares and bonds of Chinese property companies fell further on Wednesday after China Evergrande Group (3333.HK) missed a third round of interest payments on its dollar bonds in three weeks, and as others warned of defaults.

In the clearest sign yet of global investors’ worries of spreading debt contagion, the option-adjusted spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (.MERACYC) surged to a fresh all-time high of 2,337 basis points on Tuesday evening U.S. time.

On Wednesday morning, Shanghai Stock Exchange data showed onshore bonds issued by developers Shanghai Shimao Co Ltd (600823.SS) and Country Garden Properties Group were among the biggest losers on the day, falling between 1% and 4.2%.

A sub-index tracking A-shares of property firms (.CSI000952) fell 1.58% against a 0.31% rise in the blue-chip CSI300 index (.CSI300).

Markets in Hong Kong were closed on Wednesday morning due to a typhoon affecting the city.

Evergrande did not pay nearly $150 million worth of coupons on three bonds due on Monday, following two other missed payments in September. While the company has not technically defaulted on those payments, which have 30-day grace periods, investors say they are expecting a long and drawn-out debt restructuring process. read more

The company’s main unit, Hengda Real Estate Group Co, faces a 121.8 million yuan onshore bond coupon payment on Oct. 19 and Evergrande has another $14.25 million dollar bond coupon due on Oct. 30. read more

Debt pressures extend far beyond Evergrande. Chinese property developers have $555.88 million worth of high-yield dollar bond coupons due this month, and nearly $1.6 billion due before year-end, and Refinitiv data shows at least $92.3 billion worth of Chinese property developers’ bonds maturing next year read more

Evergrande’s mid-sized rival Fantasia (1777.HK) has also already missed a payment and Modern Land (1107.HK) and Sinic Holdings (2103.HK) are trying to delay payment deadlines that would still most likely be classed as a default by the main rating agencies.

“These stories have challenged the notion that Evergrande is one of a kind,” analysts at Capital Economics wrote in a note.

While China’s policymakers will likely be able to avoid a “doomsday scenario” the overextended property sector will continue to weigh on the world’s second-largest economy, they said.

“Even following an orderly restructuring of the worst-affected developers with minimal contagion to the financial system, construction activity would still almost inevitably slow much further.”

The IMF said on Tuesday that China has the ability to address the issues linked to Evergrande’s indebtedness, but warned that an escalation of the situation could lead to the emergence of broader financial stress. read more

Reporting by Andrew Galbraith; Editing by Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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Business

China Evergrande bondholders brace for Monday’s coupon deadline

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An exterior view of the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China, September 29, 2021. REUTERS/Aly Song

SHANGHAI, Oct 11 (Reuters) – Offshore bondholders of beleaguered developer China Evergrande Group (3333.HK) were on Monday bracing for news on more than $148 million in looming bond coupon payments after the company missed two coupon deadlines last month.

Expectations that the company will make the semi-annual payments on its April 2022, April 2023 and April 2024 notes due Oct. 11 are slim as it prioritises onshore creditors and remains silent on its dollar debt obligations.

That has left offshore investors worried about the risk of large losses at the end of 30-day grace periods as the developer wrestles with more than $300 billion in liabilities. read more

Evergrande’s troubles have sent shockwaves across global markets and the firm has already missed payments on dollar bonds, worth a combined $131 million, that were due on Sept. 23 and Sept. 29.

Advisers to offshore bondholders said on Friday that they want more information and transparency from the cash-strapped property developer.

The offshore bondholders are also demanding more information about Evergrande’s plan to divest some businesses and how the proceeds would be used, the advisers said. read more

Trading in shares of Evergrande, as well as its Evergrande Property Services Group (6666.HK) unit, has been halted since Oct. 4 pending a major deal announcement. On Monday, the company’s electric vehicle unit (0708.HK) swung between large losses and gains, falling as much as 4.65% and rising by up to 9.28%.

Evergrande contagion worries affecting the broader Chinese property sector spilled into heavy selling of Chinese high-yield dollar debt last week, particularly after smaller developer Fantasia Holdings Group Co (1777.HK) missed the deadline on a $206 million international market debt payment on Oct. 4.

The option-adjusted spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (.MERACYC) was last recorded at 2,069 basis points on Friday evening U.S. time, its widest ever.

Fantasia Group China Co said on Monday it will adjust the trading mechanism of its Shanghai-traded bonds following credit downgrades by China Chengxin International Credit Rating Co (CCXI), and said its parent had formed an emergency group to resolve liquidity problems.

The move comes after the Shanghai Stock Exchange on Friday paused trading of two of Fantasia Group’s exchange-traded bonds following sharp falls, and echoes a similar adjustment in trading of Evergrande’s onshore bonds last month.

“We believe policymakers have zero tolerance for systemic risk to emerge and are aiming to maintain a stable property market, and policy support could be forthcoming if the deterioration in property activity levels worsen,” said Kenneth Ho, head of Asia Credit Strategy at Goldman Sachs.

“That said, we also believe that policymakers do not want to over-stimulate, and their longer term goal is to deleverage the property sector. Finding the right balance may require more time, and the uncertainties are likely to be a continued source of volatility for the China property (high-yield) market.”

Reporting by Andrew Galbraith
Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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Business

Evergrande backer Chinese Estates’ stock soars on take-private offer

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The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song

HONG KONG, Oct 7 (Reuters) – Shares of Chinese Estates Holdings (0127.HK), a former major shareholder of embattled developer China Evergrande (3333.HK), jumped as much as 32% on Thursday after it announced an offer to be taken private for HK$1.91 billion ($245 million).

The Hong Kong developer said on Wednesday the family of Chinese Estates’ biggest shareholder, Joseph Lau, had proposed to take it private by offering minority shareholders a 38% premium to its last traded price.

The offer represents the latest move by Lau and China Estates to emerge from the shadow of Evergrande, which is floundering due to a huge debt load and threatening the Hong Kong company’s future.

Formerly Evergrande’s second-biggest shareholder, Chinese Estates has already slashed its holding over the past few months to 4.39% from 6.48%. It has flagged a goal to exit the holding completely and estimates a loss of HK$10.41 billion for the current year from the stake disposal. read more

Eugene Law, business development director of China Galaxy International Financial, said as a listed company Chinese Estates would need to keep updating on its position in Evergrande and “it does not want that trouble”.

Once China’s top-selling property group, Evergrande is facing one of the country’s largest-ever defaults as it struggles with more than $300 billion of debt. Its fate is also unsettling global markets wary about the fallout of one of China’s biggest borrowers toppling.

Chinese Estates’ shares rose to HK$3.81 by noon. They resumed trading on Thursday after being suspended on Sept. 29.

Shares of the Hong Kong developer were down 42% this year before the trading suspension, dragged down by unrealized losses in its investment in Evergrande whose stock took a hit due to liquidity crisis and default risks.

Shares of Chinese Estates/Evergrande

In a statement late on Wednesday, Chinese Estates said its stock price may be further affected by Evergrande, as it is “cautious and concerned” about recent developments at the Chinese developer.

A delisting would reduce the costs and management resources to maintain the listing status, Chinese Estates added, and it could provide more flexibility to implement long-term business strategies.

Other than Evergrande, Chinese Estates said it also has significant investments in another Chinese developer, Kaisa Group (1638.HK), whose shares have also suffered falls over the past few months on wider liquidity concerns about China’s real estate sector.

Chinese Estates’ former chairman Lau has been a major backer of Evergrande chairman Hui Ka Yan and is a member of the so-called “poker club” of Hong Kong tycoons that includes Hui. read more

Lau, whose family owns about 75% of Chinese Estates’ equity capital, resigned as its chairman and chief executive in 2014 after he was found guilty of bribery and money laundering charges in the gambling hub of Macau.

($1 = 7.7857 Hong Kong dollars)

Reporting By Clare Jim and Donny Kwok; Editing by Anne Marie Roantree and Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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Business

Hong Kong property agencies suing Evergrande to recover commissions

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The logo of China Evergrande is seen at outside China Evergrande Centre building in Hong Kong, China September 23, 2021. REUTERS/Tyrone Siu

HONG KONG, Oct 6 (Reuters) – Two Hong Kong property agencies are suing heavily indebted China Evergrande Group (3333.HK) over unpaid commissions, according to a court filing and media reports, piling pressure on the developer as it scrambles to raise funds and avert a collapse.

Centaline filed a suit against Evergrande in September to recover HK$3.1 million ($398,196) in overdue commissions, a court filing showed, while the South China Morning Post newspaper reported Midland Holdings (1200.HK) is claiming unpaid commission of HK$43.45 million for two developments in Hong Kong.

An executive at Centaline China told Reuters they have also filed a suit against Evergrande in a Guangzhou court in southern China, seeking to claim hundreds of millions of yuan it says it is due.

Centaline confirmed to Reuters it filed a claim in Hong Kong last month, but declined to comment further. Midland declined to comment, saying the case was going through legal procedures. Evergrande did not immediately respond to a request for comment.

Hong Kong’s exposure to debt-laden developer China Evergrande is “very minimal” at 0.05%, or HK$14 billion ($1.79 billion) of banking assets and will not cause any systemic risks, the newspaper reported on Sunday, citing the city’s Financial Secretary Paul Chan. read more

Evergrande has vowed to repay its suppliers and contractors in mainland China as soon as possible, in some cases offering apartments or other real estate assets, as construction at many of its sites have halted because of delayed payments.

With liabilities of $305 billion, Evergrande has sparked concerns its cash crunch could spread through China’s financial system and reverberate globally, a worry that has eased with the Chinese central bank’s vow last week to protect homebuyers’ interests. read more

Growing worries about defaults at Chinese property developers triggered a rout in their shares and bonds on Tuesday with fresh credit rating downgrades and uncertainty about the fate of cash-strapped China Evergrande Group sapping investor sentiment. read more

Last month it missed coupon payments on two dollar bond tranches and is scrambling to sell assets to pay creditors, prioritising repayment to onshore lenders in the last few weeks.

($1 = 7.7851 Hong Kong dollars)

Reporting by Donny Kwok and Clare Jim; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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Business

China property sector default woes deepen amid Evergrande uncertainty

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Police officers and security personnel walk outside the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China, September 30, 2021. REUTERS/Aly Song

HONG KONG, Oct 5 (Reuters) – Worries about rising debt defaults by Chinese property developers sapped investor sentiment on Tuesday amid fresh credit rating downgrades and uncertainty about the fate of China Evergrande Group as it scrambles to raise cash by selling assets.

Evergrande (3333.HK) is facing one of the country’s largest-ever defaults as it wrestles with more than $300 billion of debt. The company last month missed making coupon payments on two dollar bond tranches.

The possible collapse of one of China’s biggest borrowers has triggered worries about contagion risks to the property sector in the world’s second-largest economy, as its debt-laden peers are hit with rating downgrades on looming defaults.

Evergrande on Monday requested a halt in the trading of its shares pending an announcement about a major deal. Evergrande Property Services Group (6666.HK) also requested a halt referring to “a possible general offer” for company shares.

China’s state-backed Global Times said Hopson Development (0754.HK) was the buyer of a 51% stake in the property business for more than HK$40 billion ($5.1 billion), citing unspecified other media reports.

Evergrande declined to comment ahead of an official announcement, as trading in the company’s shares remained suspended on Tuesday.

While investors awaited confirmation of the Evergrande stake divestment, Chinese developer Sinic Holdings (2103.HK) became the latest to be downgraded by Fitch Ratings on uncertainty over the repayment of its $246 million bonds maturing Oct 18.

Sinic’s long-term issuer default rating was cut to ‘C’ from ‘CCC’, and came after the company announced that certain subsidiaries have missed interest payments on onshore financing arrangements, Fitch said in its report on Tuesday.

S&P Global Ratings also lowered its rating on the company, saying it had run into “severe liquidity problem and its debt-servicing ability has almost been depleted”. It said the company was likely to default on its notes due on Oct. 18.

Sinic declined to comment on the ratings downgrades.

“Since the Evergrande crisis, investors have become more worried and focused about Chinese developer’s repayment ability,” Thomas Kwok, head of equity business at Hong Kong brokerage CHIEF Securities.

The liquidity issues have increased as many developers were not able to issue fresh debt to refinance, and as their ability to raise cash from selling properties dropped because of new regulations, he said.

“This will be a vicious cycle for the developers that are not strong enough, because there is not enough liquidity in the market for everyone.”

MARKET IMPACT

The $5 billion Evergrande is likely to get from the reported unit stake sale would theoretically cover its near-term offshore bond payments. It has $500 million in bond coupons due by year-end, followed by a $2-billion dollar bond maturity in March.

Analysts have said the potential Evergrande deal signals the company was still working to meet its obligations. But any fire-sale of its assets would further amplify concerns about the rest of China’s property sector and the broader economy.

Chinese homebuilder Fantasia Holdings’ (1777.HK) dollar-denominated bonds lost nearly half their market value in a massive Monday selloff, after it said it had failed to make a $206 million international market debt payment on time.

In a statement, the property developer said it will assess the potential impact of the non-payment on the group’s financial conditions.

An index of China high-yield debt (.MERACYC), which is dominated by developer issuers, hit its lowest since the pandemic drawdown in 2020, and has lost almost 20% since May – while comparable U.S. and European indexes have rallied.

Asian markets fell for a third straight session on Thursday as Evergrande’s troubles added to broader investor worries about rising inflation and slowing world growth, while in Hong Kong the company’s developer peers were under renewed pressure.

An index tracking Hong Kong-listed mainland property stocks (.HSMPI) fell 2.95% on Tuesday, compared to a 0.3% gain in the local benchmark (.HIS).

Shares in Guangzhou R&F Properties (2777.HK) and Sunac China Holdings (1918.HK) each fell 8% while the offshore yuan was also under pressure. Shares in Evergrande’s electric vehicle unit eased after jumping on Monday.

Evergrande’s dollar bonds have firmed marginally over recent days, but remain at distressed levels below 30 cents on the dollar.

Reporting by Clare Jim, Tom Westbrrok and Alun John; Writing by Sumeet Chatterjee; Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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Business

China Evergrande offshore investors face ‘large losses’ after second payment miss

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SHANGHAI/BEIJING, Sept 30 (Reuters) – China Evergrande Group (3333.HK) missed paying bond interest due on Wednesday, two bondholders said, its second unpaid offshore debt payment in a week, although the cash-strapped company is scrambling to meet its obligations in its home market.

The company, reeling under a debt pile of $305 billion, was due on Wednesday to make a $47.5 million bond interest payment on its 9.5% March 2024 dollar bond, after having missed $83.5 million in coupon payments last Thursday.

With liabilities equal to 2% of China’s GDP, Evergrande has sparked concerns its woes could spread through the financial system and reverberate around the world, though worries have eased somewhat after the central bank vowed to protect homebuyers’ interests.

The developer’s silence on its offshore payment obligations has, however, left global investors wondering if they will have to swallow large losses when 30-day grace periods end for coupons that were due on Sept. 23 and Sept. 29.

Some offshore Evergrande bondholders had neither received interest payments nor any communication by the end of Wednesday New York time, said the people familiar with the matter, who declined to be identified due to sensitivity of the issue.

A spokesperson for Evergrande did not have any immediate comment. Reuters was unable to determine whether Evergrande has told bondholders what it plans to do regarding the coupon payment due on Wednesday.

The two missed offshore payments come as the company, which has nearly $20 billion in offshore debt, faces deadlines on dollar bond coupon payments totalling $162.38 million in the next month.

Once China’s top-selling developer, Evergrande is now expected to be one of the largest-ever restructurings in the country. It has been prioritising its onshore liabilities amid concerns about its troubles triggering social unrest.

“I can’t see there being much willingness to give a fairer outcome to offshore bondholders rather than onshore banks, let alone house buyers and people who have lent onshore through the personal loan structures,” said Alexander Aitken, a partner at Herbert Smith Freehills in Hong Kong.

“Of course legally there is also structural subordination from being offshore, which means lenders to Evergrande’s onshore subsidiaries get paid before lenders to the parent company or any offshore debt issuer.”

CONSTRUCTION RESUMPTION

Beijing is unlikely to intervene directly to resolve Evergrande’s crisis in the form of a bailout, but analysts say it is wary of a messy collapse that could fuel unrest by local investors, suppliers and homebuyers.

Authorities have in recent days prodded government-owned firms and state-backed property developers to purchase some Evergrande assets to reduce such risks.

Some instant messaging groups used by people owed money by Evergrande to organize protests and discuss claims have been blocked on Tencent Holdings’ WeChat platform, group members said on Wednesday.

Evergrande said on Wednesday that it would sell a 9.99 billion yuan ($1.5 billion) stake it owns in Shengjing Bank Co Ltd (2066.HK) to a state-owned asset management company.

The bank, one of Evergrande’s main lenders, demanded all net proceeds from the sale go towards settling the developer’s debts with Shengjing, which had 7 billion yuan in loans to Evergrande as of the first half last year.

Separately, Evergrande’s Pearl River Delta business said in a WeChat post on Tuesday that nearly 20 developments in the area have resumed construction. The post showed construction photos of various sites, and said that work resumption had accelerated since Evergrande vowed at the beginning of the month to deliver homes to buyers.

Its main onshore unit Hengda Real Estate Group announced a resolution of an onshore bond coupon payment on Sept. 23 through “private negotiations”.

Evergrande’s shares opened sharply higher on Thursday, rising as much as 5.21% before reversing course to slump as much as 7.17%. The stock was down 5% in afternoon trade.

“Regardless of how the debt is restructured, Evergrande shareholders and investors in offshore, USD-denominated corporate bonds will suffer large losses,” said Jing Sima, chief China strategist at BCA Research in a note.

($1 = 6.4641 Chinese yuan)

Reporting by Anne Marie Roantree, Clare Jim, Alun John and Donny Kwok in Hong Kong, Xiao Han in Beijing, Andrew Galbraith in Shanghai; Writing by Sumeet Chatterjee; Editing by Christopher Cushing, Gerry Doyle and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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Business

China Evergrande to sell $1.5 bln stake in Shengjing Bank to state firm

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Cranes stand at a construction site near the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song

  • Shengjing demands repayment of debts due to it
  • Evergrande says sale will help stabilise Shengjing
  • Evergrande faces bond payment deadline Wednesday

HONG KONG, Sept 29 (Reuters) – Cash-strapped China Evergrande (3333.HK) said on Wednesday it plans to sell a 9.99 billion yuan ($1.5 billion) stake it owns in Shengjing Bank Co Ltd (2066.HK) to a state-owned asset management company as it scrambles to raise funds.

Shengjing Bank had demanded that all net proceeds from the disposal be applied to settle the relevant financial liabilities of the group due to Shengjing Bank, Evergrande said.

That requirement suggests that Evergrande, which missed a bond interest payment last week, will be unable to use the funds for other purposes such as another interest payment to offshore bondholders of $47.5 million due on Wednesday.

The payment deadline is being closely watched by investors as the developer’s next big test in public markets. read more

Evergrande has rapidly become China’s biggest corporate headache as it teeters between a messy meltdown with far-reaching impacts, a managed collapse or the less likely prospect of a bailout by Beijing. read more

The 1.75 billion shares, representing 19.93% of the issued share capital of the bank, will be sold for 5.70 yuan apiece to Shenyang Shengjing Finance Investment Group Co Ltd, a state-owned enterprise involved in capital and asset management, China Evergrande said in a filing to the Hong Kong bourse.

Shenyang Shengjing’s stake in the bank will be increased to 20.79% after the deal to become the bank’s largest shareholder.

“The company’s liquidity issue has adversely affected Shengjing Bank in a material way,” Evergrande Chairman Hui Ka Yan said in the statement.

“The introduction of the purchaser, being a state-owned enterprise, will help stabilise the operations of Shengjing Bank and at the same time, help increase and maintain the value of the 14.75% interest in Shengjing Bank retained by the company.”

Beijing is prodding government-owned firms and state-backed property developers to purchase some of embattled China Evergrande Group’s assets, people with knowledge of the matter told Reuters this week. read more

Its stake in the bank would be reduced to 14.75% from 34.5%.

Reporting by Donny Kwok and Anne Marie Roantree; Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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World

Zambia’s Chinese debt nearly twice official estimate, study finds

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Zambia’s President Hakainde Hichilema addresses the 76th Session of the United Nations General Assembly at U.N. headquarters in New York, U.S. on September 21, 2021. Mary Altaffer/Pool via REUTERS/File Photo

JOHANNESBURG, Sept 28 (Reuters) – Zambia’s debt to Chinese public and private lenders is $6.6 billion, almost double the amount disclosed by the previous Zambian government, an analysis of loan data by the China Africa Research Initiative (CARI) has estimated.

Copper-rich Zambia became Africa’s first coronavirus-era sovereign default last November and its ongoing debt restructuring has become a test case of Western multilateral efforts for countries to fully disclose their borrowings.

Zambia’s previous government, led by Edgar Lungu, said its Chinese debt stood at $3.4 billion. But the estimate published by CARI on Tuesday chimes with recent comments from newly elected President Hakainde Hichilema, who took office last month, that the debt load is likely higher.

Zambia’s finance ministry said its official figures were “broadly consistent” with the CARI estimate, adding that the government’s reporting on public debt was accurate and transparent.

“Key creditors and stakeholders, including the International Monetary Fund and advisers to the bondholders’ ad hoc committee have received more detailed data on the makeup of the public debt under each category under non-disclosure agreements,” the finance ministry added in a statement.

The country’s international creditors, with which the government is in talks, have complained that the lack of detail on Zambia’s China loans – which carry specific non-disclosure terms – has hindered the debt restructuring process. read more

“Given the complicated situation … reaching consensus on burden-sharing is likely to prove exceptionally difficult,” the CARI researchers who made the new estimate, Deborah Brautigam and Yinxuan Wang, wrote.

The $6.6 billion figure is based on Chinese loan data collected by CARI at the Johns Hopkins University School of Advanced International Studies. It is likely to continue to grow as it does not include penalties or interest arrears that continue to build up.

China is Africa’s largest creditor. It is part of the World Bank and International Monetary Fund-supported Debt Service Suspension Initiative which has temporarily frozen debt payments to dozens of the world’s poorest countries but is being urged to do more in terms of disclosure.

Tuesday’s study estimated that $7.77 billion in loans to Zambia and its state-owned enterprises were disbursed by 18 major and minor Chinese banks or funds from 2000 to August 2021. Of those, Zambia has repaid at least $1.2 billion.

The estimate does not change Zambia’s total debt load of $14.3 billion, the researchers said, but shows that the Lungu government “was not transparent about the heavy weight of Chinese financiers among its many external creditors”.

Bwalya Ngandu, finance minister under Lungu, has said it is not true that Zambia’s debt numbers were understated. “We have never hidden any debt,” he said in a statement this month.

The researchers found six instances in which Chinese lenders cancelled debt owed by Zambia, for a total of $392 million.

Reporting by Helen Reid in Johannesburg; Additional reporting by Chris Mfula in Lusaka; Editing by Marc Jones, William Maclean nd Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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Business

China Evergrande bondholders in limbo over debt crisis

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  • No sign of Evergrande paying dollar bond interest
  • Company has 30-day grace period before the bonds default
  • PBOC injects cash into banking system; Evergrande shares fall

SINGAPORE, Sept 24 (Reuters) – China Evergrande slipped toward a kind of limbo on Friday as time ticked away on an interest payment deadline which global markets are watching for signs of default, leaving investors on tenterhooks over the embattled property giant’s fate.

The company owes $305 billion, has run short of cash and markets are worried a collapse could pose systemic risks to China’s financial system and reverberate around the world.

China’s central bank again injected cash into the banking system on Friday, seen as a signal of support for markets. But authorities have been silent on Evergrande’s predicament and China’s state media has offered no clues on a rescue plan.

Evergrande (3333.HK) appointed financial advisers and warned of default last week, and world markets fell heavily on Monday amid fears of contagion, though they have since stabilised.

At its offices, furious small investors have protested to try and retrieve life savings sunk into its properties and wealth-management products.

Evergrande has promised to prioritise such investors and resolved one coupon payment on a domestic bond this week, giving markets a glimmer of hope. But it has said nothing about an $83.5 million offshore interest payment that was due on Thursday or a $47.5 million payment due next week.

It enters a 30-day grace period if it fails to pay Thursday’s dues and would be in default if that window passed without settling the debt. Bondholders are starting to think it might be a month or so before things become clearer.

As Friday trade got underway in Hong Kong, there had been no announcements about a payment. A company spokesperson did not respond to requests for comment.

“Current market pricing estimates that investors in Evergrande’s dollar bonds are likely to recover very little,” said Jennifer James, a portfolio manager and lead emerging markets analyst at Janus Henderson Investors.

“The likeliest outcome is that the company will engage with creditors to come up with a restructuring agreement,” she said.

“How China handles Evergrande, and others, could be consequential. If mismanaged, then the loss of confidence could have contagion effects to other financial markets.”

PLAY FOR TIME

Global markets have begun a recovery following a sharp selloff, trading on the basis that Evergrande’s troubles can be contained.

Only some $20 billion of Evergrande’s debts are owed offshore. Yet the risks at home are considerable because a collapse could crash the property sector which comprises a quarter of China’s economy and is an important store of wealth.

“Housing sales and investments could inevitably slow further – this would knock nearly 1 percentage point off GDP growth,” analysts at Societe Generale said in a note.

“The longer policymakers wait before acting, the higher the hard-landing risk.”

Yet there have so far been few signs of official intervention. The People’s Bank of China’s 270 billion yuan ($42 billion) cash injection this week is the largest weekly sum since January and has helped put a floor under stocks.

Bloomberg Law also reported that regulators had asked Evergrande to avoid a near-term default, citing unnamed people familiar with the matter.

However the Wall Street Journal said, citing unnamed officials, that authorities had asked local governments to prepare for Evergrande’s downfall.

“Given the deliberate pace of Chinese policy making, the authorities may well choose to play for time,” said Wei-Liang Chang, a macro strategist at DBS Bank in Singapore.

He said they could extend liquidity assistance through the grace period on Evergrande’s coupon payments, given it had no dollar bond maturities looming until March 2022.

Evergrande’s shares handed back some Thursday gains on Friday and fell 3%, while stock of its electric-vehicle unit (0708.HK) dropped 18% to a four-year low. Its dollar bonds with imminent payments due , last traded around 30 cents on the dollar.

($1 = 6.4589 Chinese yuan renminbi)

Reporting by Tom Westbrook. Additional reporting by Clare Jim in Hong Kong and Andrew Galbraith in Shanghai; Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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Business

Evergrande begins repaying wealth product investors with property

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An exterior view of China Evergrande Centre in Hong Kong, China March 26, 2018. REUTERS/Bobby Yip/File Photo/File Photo

BEIJING, Sept 19 (Reuters) – Cash-strapped developer China Evergrande Group (3333.HK) has begun repaying investors in its wealth management products with real estate, a unit of its main Hengda Real Estate Group Co Ltd unit said.

Evergrande, with over $300 billion in liabilities, is in the throes of a liquidity crisis that has left it racing to raise funds to pay its many lenders and suppliers. It has a bond interest payment of $83.5 million due on Thursday.

The company said in a WeChat post dated Saturday that investors interested in redeeming wealth management products for physical assets should contact their investment consultants or visit local offices.

Financial news outlet Caixin reported on Sunday that an estimated 40 billion yuan ($6 billion) in Evergrande wealth management products are outstanding. Such products are typically held by retail investors.

Specific payment methods and details are subject to local conditions, a customer service representative told Reuters on Sunday.

According to a proposal seen earlier by Reuters that Evergrande did not confirm, wealth management product investors can choose from discounted apartments, office, retail space or car parks for repayment.

Earlier this month, a stock exchange filing showed that Evergrande had repaid 219.5 million yuan in overdue debts due to supplier Skshu Paint Co Ltd (603737.SS) in the form of apartments in three unfinished property projects.

On Sept. 10, Evergrande had vowed to repay all of its matured wealth management products as soon as possible.

($1 = 6.4655 Chinese yuan renminbi)

Reporting by Aishwarya Nair in Bengaluru and Min Zhang and Tony Munroe in Beijing; Editing by William Mallard

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