Wrapup 1: Evergrande dodges default again but sector debt concerns remain

Xinyuan Real Estate Co

11/11/2021 06:26

* Bondholders receive overdue coupon payments - source
    * Chinese property shares, bonds stage relief rally  
    * Broader liquidity concerns remain, more debts coming due

    By Anshuman Daga, Clare Jim and Andrew Galbraith
    SINGAPORE/HONG KONG, Nov 11 (Reuters) - Cash-strapped
developer China Evergrande Group averted a destabilising default
at the last minute for the third time in the past month, with a
source on Thursday saying several bondholders had received
overdue coupon payments.
    Evergrande  3333.HK , the world's most indebted developer,
has been stumbling from deadline to deadline in recent weeks as
it grapples with more than $300 billion in liabilities, $19
billion of which are international market bonds.
    Chinese media outlet Cailianshe reported several bondholders
have received interest payments of the three bond tranches that
had a total of more than $148 million due last month.
 VG198203696=   VG198203777=   VG198204064= 
    The payments were made at the end of a 30-day grace period
that ended Wednesday https://www.reuters.com/business/evergrande-faces-default-deadline-148-mln-payment-some-bondholders-paid-report-2021-11-10,
 as was the case with two separate offshore coupon payments that
were due in late September and for which the grace periods ended
late last month. 
    A failure to pay would have resulted in a formal default by
the company and triggered cross-default provisions for other
Evergrande dollar bonds, exacerbating a debt crisis looming over
the world's second-largest economy that has rattled global
markets.
    "The near-term fix seems to be happening but there's a long
way to go before this issue gets sorted out. These are early
days," said the source with knowledge of the matter, referring
to Evergrande and declining to be named without authorisation to
talk to the media.
    Evergrande, which is at the centre of a deepening liquidity
squeeze in China's $5 trillion property sector, did not respond
to Reuters request for comment on its latest bond coupon
payment.
    Although the developer managed to avoid a default again,
woes in the property sector showed no signs of abating with a
wall of debt coming due.
    Evergrande has coupon payments totalling more than $255
million due on Dec. 28. It has come under pressure from its
other creditors at home and a stifling funding squeeze has cast
a shadow over hundreds of its residential projects.
    Investor focus is now also shifting to other cash-strapped
developers which have a string of offshore payments coming due
in the short term, including Kaisa Group  1638.HK .
    Kaisa has the most offshore debt of any Chinese developer
after Evergrande and pleaded for help from creditors https://www.reuters.com/world/china/chinas-state-council-held-meeting-with-property-developers-banks-source-2021-11-09
 this week. It has coupon payments totalling over $59 million
due on Thursday and Friday. 
    Kaisa, which became China's first property company to
default on an overseas bond in 2015, has already missed payments
on some wealth management products at home. 
    The developer did not immediately respond to Reuters request
for comment. 
    
    HARD LANDING 
    While the U.S. Federal Reserve this week warned China's
troubled property sector could pose global risks, there were no
clear indications whether Beijing will step in with a broader,
national plan to tackle the issue.
    Chinese regulators have in recent weeks, however, sought to
reassure investors https://www.reuters.com/article/china-evergrande-debt-pboc-idCNL1N2RG0KX
 and homebuyers, saying risks were controllable and excessive
credit tightening by banks was being corrected.
    Regulators and government think tanks have also held
meetings with developers in the past few weeks, and the market
is expecting some easing in credit and housing policies to
prevent a hard landing of the sector.
    Those hopes and Evergrande's payment sparked a relief rally
across Chinese property shares, with an index of real estate
A-shares  .CSI000952  surging nearly 8%, and Hong Kong's Hang
Seng Mainland Properties Index  .HSMPI  trading up more than 3%.
    Shares of Evergrande listed in Hong Kong rose 5.5% at noon.
    Chinese developers' bond prices, which have been hit hard in
recent weeks, soared even higher. 
    Duration Finance data showed the price on China Aoyuan
Group's  3883.HK  5.88% March 2027 bond jumping more 30% on the
day, although it continued to trade at deeply distressed levels
of around 36 cents in the dollar. 
    Bonds issued by Times China Holdings  1233.HK  Xinyuan Real
Estate  XIN.N , Yuzhou Group Holdings  1628.HK  and Sunac China
Holdings  1918.HK  also rose more than 10%.
    An index of dollar-denominated Asian high-yield bonds
 AHYG.SI  rose more than 1%, while Chinese high-yield corporate
dollar spreads  .MERACYC  narrowed from record highs.   

 (Editing by Sumeet Chatterjee and Lincoln Feast)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))