SUMMARY 5-Evergrande on the brink of default as $ 148 million payment falls due

(Add lawyer comments on Evergrande)

* Evergrande to pay $ 148 million bond coupon on Wednesday

* Some bondholders did not receive payment until the end of business in Asia

* Developer Fantasia stock plunges 50% after a missed payment

* Moody’s retrograde Kaisa, S&P reduces Shimao to “BB +” from “BBB-“

By Andrew Galbraith and Clare Jim

SHANGHAI / HONG KONG, Nov. 10 (Reuters) – Some cash-strapped China Evergrande bondholders failed to receive coupons at the end of 30-day grace periods when business in Asia closed Wednesday, sources said, pushing the developer to the brink of default again.

Evergrande, the world’s most indebted developer who once embodied an era of freewheeling borrowing and construction, has stumbled from maturity to maturity in recent weeks as it grapples with more than $ 300 billion in liabilities. , of which $ 19 billion are international market bonds.

The company has not defaulted on any of its offshore debt obligations. But a 30-day grace period on coupon payments of more than $ 148 million on its April 2022, 2023 and 2024 bonds ends Wednesday.

A default would result in a formal default by the company and trigger cross-default clauses for other Evergrande dollar bonds, exacerbating a debt crisis that threatens the world’s second-largest economy.

It is unclear exactly when the grace period expires on Wednesday, but the two sources familiar with the matter said some bondholders had not been paid by the end of the Asian business day. They declined to be named because they were not authorized to speak to the media.

Evergrande declined to comment.

For its two separate offshore coupon payment obligations that were due at the end of September, the developer’s bondholders only received the payments one business day after the 30-day grace periods had ended.

“He is expected to be paid,” said Karl Clowry, restructuring advisor and partner at Addleshaw Goddard LLP, also highlighting potential for easing in the weeks leading up to the three red lines https: // www .reuters. com / article / china-property-debt-rules / update-1-chinese-state-firms-ask-regulators-to-adjust-loan-curbs-for-property-deals-cailianshe-idINL1N2S10OY – financial requirements introduced by the central bank last year that developers must meet to obtain new bank loans.

“It would be quite surprising if the funds did not reach the administrator on time given the immediate effect of cross default and ripple effects on suppliers and on the real estate market of the People’s Republic of China at large. “

Evergrande’s problems add to concerns about tight liquidity in the real estate sector. It also has coupon payments totaling over $ 255 million on its June 2023 and 2025 bonds due December 28.

China’s real estate problems nL4N2RI1AS rocked global markets in September and October. There was a brief lull in mid-October after Beijing tried to reassure markets that the crisis would not be allowed to get out of hand.

But concerns have resurfaced, with the US Federal Reserve warning on Tuesday that China’s real estate sector could present global risks.

More and more developers are seeing their credit scores reduced due to the deterioration of their financial profile.

Moody’s Investors Service demoted Kaisa Group on Wednesday, which made a desperate appeal on Tuesday https://www.reuters.com/world/china/chinas-state-council-held-meeting-with-property-developers-banks-source- 2021-11-09 / #: ~: text =% E2% 80% 9CFinancial% 20stress% 20in% 20China% 20could, twice a year% 20financial% 20stability% 20 aid report, citing liquidity risks, financial flexibility limited and poor recovery prospects for its creditors.

Kaisa has the most offshore debt of all Chinese developers after Evergrande. The developer has more than $ 59 million in coupon payments due Thursday and Friday.

S&P Global Ratings has said separately that it has downgraded Shimao Group Holdings’ rating from “BB +” to “BBB-” over concerns that difficult business conditions may hamper the company’s efforts to reduce its debt.

S&P considers a rating lower than “BBB-” to be a speculative rating.

Concerns about the potential fallout from Evergrande also slammed bonds https://www.reuters.com/world/china/chinas-state-council-held-meeting-with-property-developers-banks-source-2021- 11-09 from Chinese real estate companies.

Shares of developer Fantasia Holdings plunged 50% on Wednesday after it said there was no guarantee it would be able to meet its other financial obligations following a missed payment of $ 205.7million. dollars due October 4.

FINANCING OPTIONS

Highlighting the tightening of liquidity, some real estate companies announced their intention to issue debt on the interbank market during a meeting with China’s interbank bond market regulator, the Securities Times reported on Wednesday.

In the near future, real estate companies will issue bonds on the open market for financing, while banks and other institutional investors will help through bond investments, the newspaper said.

Debtful developers, including Evergrande and Kaisa, are also looking to raise funds to pay off their many creditors by selling some of their property and other business assets.

Beijing has pushed public companies and state-backed real estate developers to buy some of Evergrande’s assets in an attempt to control the fall.

Growing concerns about the spread of developer woes to other sectors were visible on Wednesday as the spread, or risk premium, between low-risk, higher-quality Chinese companies and US Treasuries widened to reach a peak of more than five months.

Once China’s best-selling real estate developer, Evergrande narrowly avoided catastrophic defaults on two occasions last month by paying interest on its offshore bonds just before their grace periods expired.

Despite the company’s debt problems, its electric vehicle (EV) unit is pursuing its business plan. The unit is seeking Chinese regulatory approval to sell its first Hengchi 5 sport utility vehicles.

Evergrande shares ended up 3% on Wednesday, while shares in the EV unit ended the day 0.8% higher after rising more than 2% earlier.

(Reporting by Andrew Galbraith in Shanghai and Clare Jim in Hong Kong; additional reporting by Karin Strohecker in London, written by Sumeet Chatterjee; edited by Stephen Coates, Lincoln Feast, Emelia Sithole-Matarise and Nick Macfie)


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