Too little, too late? Evergrande’s tortuous restructuring, asset sales in focus after default averted By Reuters

© Reuters. FILE PHOTO: Cranes stand at a development website close to the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Tune/File Picture

By Anshuman Daga and Scott Murdoch

SINGAPORE/HONG KONG – Until China Evergrande Group takes fast steps for an orderly restructuring of its debt pile and steps up asset gross sales, its last-minute bond curiosity cost this week will do little to shore up collectors’ assist for the developer, analysts and attorneys mentioned.

In an surprising transfer, Evergrande wired an $83.5 million coupon cost resulting from offshore bondholders, days earlier than a 30-day grace cost interval ends on Saturday, an individual with direct information of the matter mentioned on Friday.

With greater than $300 billion in liabilities, Evergrande, as soon as China’s top-selling property developer, faces deep scepticism on whether or not it might make extra near-term coupon funds with its property gross sales tumbling 30% within the 12 months to Oct. 20.

“Whereas clearly a optimistic, the coupon cost doesn’t tackle the general considerations about Evergrande’s sustained liquidity via the primary maturity in Q2 2022 and past,” mentioned John Han, a companion at regulation agency Kobre & Kim in Hong Kong.

“This solely reveals that the corporate isn’t but prepared for the home to come back down fully via an enormous cascade of cross defaults. Time is required for what’s deliberate subsequent,” Han mentioned.

Evergrande faces coupon funds totalling practically $340 million between Nov. 1 and Dec. 28 on its offshore bonds, on high of excellent missed funds.

The developer has practically $20 billion in offshore debt.

“Evergrande will nonetheless have many money owed to be repaid within the quick time period sooner or later, and its fundamentals comparable to (dwelling) gross sales haven’t seen any apparent indicators of enchancment,” mentioned Kenny Ng, an analyst at Everbright Solar Hung Kai. “On the similar time, the present value of Evergrande’s bonds nonetheless displays the insecurity available in the market for its future,” he mentioned. Evergrande’s shares closed 4.3% increased on Friday, however are nonetheless down 82% up to now this 12 months. Its greenback bond costs rose, with its April 2022 and 2023 notes leaping greater than 10%, knowledge from Length Finance confirmed, although they nonetheless traded at deeply distressed ranges of round 1 / 4 of their face worth.

“Its sale of the (property) companies unit failed and its September and October gross sales had been getting worse and worse,” Castor Pang, head of analysis at Core Pacific. “It has little or no money.”

Nomura credit score analyst Iris Chen mentioned in a word that it was onerous to completely perceive the logic behind the newest cost except Evergrande is ready to pay extra coupon funds until mid-November.

Terming an Evergrande default as inevitable, Chen mentioned: “we really suppose it’s higher for the corporate to default earlier slightly than later to stop compensation of onshore debt utilizing offshore belongings.”

Evergrande formally deserted plans to promote a $2.6 billion stake in one among its key items on Wednesday.

The primary unit of Evergrande mentioned on Friday that it had not made substantial progress in disposing of the developer’s belongings.

Hengda Actual Property Group Co mentioned China Evergrande can’t assure it will likely be capable of proceed to fulfill monetary obligations underneath contracts, in a press release posted on the web site of the Shenzhen Inventory Change that echoed one from Evergrande earlier within the week.

“A number of financing channels are successfully closed to builders in response to the insurance policies carried out by the federal government. For these channels to reopen, buyers should consider these firms can stay going considerations,” mentioned Paul Lukaszewski, head of company debt, Asia Pacific, at abrdn.

“This implies they (property builders) must have adequate entry to their very own money flows and to refinancing choices to deal with their debt because it turns into due,” he mentioned.

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