SINGAPORE/HONG KONG, Oct 22 - Unless China Evergrande Group
takes quick steps for an orderly restructuring of its debt pile
and steps up asset sales, its last-minute bond interest payment
this week will do little to shore up creditors' support for the
developer, analysts and lawyers said.
In an unexpected move, Evergrande wired an $83.5
million coupon payment due to offshore bondholders, days before
a 30-day grace payment period ends on Saturday, a person with
direct knowledge of the matter said on Friday https://www.reuters.com/world/china/china-evergrande-sends-funds-trustee-bond-coupon-due-sept-23-source-2021-10-22.
With more than $300 billion in liabilities, Evergrande, once
China's top-selling property developer, faces deep scepticism on
whether it can make more near-term coupon payments with its
property sales tumbling 30% in the year to Oct. 20.
"While obviously a positive, the coupon payment does not
address the overall concerns about Evergrande's sustained
liquidity through the first maturity in Q2 2022 and beyond,"
said John Han, a partner at law firm Kobre & Kim in Hong Kong.
"This only shows that the company is not yet ready for the
house to come down completely through a massive cascade of cross
defaults. Time is needed for what is planned next," Han said.
Evergrande faces coupon payments totalling nearly $340
million between Nov. 1 and Dec. 28 on its offshore bonds, on top
of outstanding missed payments.
The developer has nearly $20 billion in offshore debt.
"Evergrande will still have many debts to be repaid in the
short term in the future, and its fundamentals such as (home)
sales have not seen any obvious signs of improvement," said
Kenny Ng, an analyst at Everbright Sun Hung Kai.
"At the same time, the current price of Evergrande's bonds
still reflects the lack of confidence in the market for its
future," he said.
Evergrande's shares closed 4.3% higher on Friday, but are
still down 82% so far this year. Its dollar bond prices rose,
with its April 2022 and 2023 notes jumping more than 10%, data
from Duration Finance showed, though they still traded at deeply
distressed levels of around a quarter of their face value.
"Its sale of the (property) services unit failed and its
September and October sales were getting worse and worse,"
Castor Pang, head of research at Core Pacific. "It has very
Nomura credit analyst Iris Chen said in a note that it was
hard to fully understand the logic behind the latest payment
unless Evergrande is able to pay more coupon payments till
Terming an Evergrande default as inevitable, Chen said: "we
actually think it is better for the company to default earlier
rather than later to prevent repayment of onshore debt using
Evergrande formally abandoned plans to sell a $2.6 billion
stake in one of its key units on Wednesday.
The main unit of Evergrande said on Friday that it had not
made substantial progress in disposing of the developer's
Hengda Real Estate Group Co said China Evergrande cannot
guarantee it will be able to continue to meet financial
obligations under contracts, in a statement posted on the
website of the Shenzhen Stock Exchange that echoed one from
Evergrande earlier in the week.
"Multiple financing channels are effectively closed to
developers in response to the policies implemented by the
government. For those channels to reopen, investors have to
believe these companies can remain going concerns," said Paul
Lukaszewski, head of corporate debt, Asia Pacific, at abrdn.
"This means they (property developers) need to have
sufficient access to their own cash flows and to refinancing
options to address their debt as it becomes due," he said.
(Reporting by Anshuman Daga in Singapore and Scott Murdoch in
Hong Kong; Additional reporting by Clare Jim; Editing by Sumeet
Chatterjee and Kim Coghill)