Evergrande apparently avoids further default

Evergrande

The real estate company has apparently paid a due bond interest payment.

(Photo: Reuters)

Beijing The ailing Chinese real estate company Evergrande has transferred the money for a bond interest payment due on September 23 to a trustee, according to an insider. As the person familiar with the matter told Reuters on Friday, the company is said to have transferred $ 83.5 million in coupon payments to an escrow account with Citibank on Thursday.

The insider confirms a report that appeared on Friday in the state financial newspaper, “The Securities Times”. Accordingly, Evergrande was able to pay off all bondholders before the grace period expired on October 23.

“This is a positive surprise,” said James Wong, portfolio manager at GaoTeng Global Asset Management, adding that many would have expected a default. The news will boost bondholders’ confidence, Wong said.

The real estate company’s dollar bonds skyrocketed on Friday morning. The company’s shares rose by up to 7.8 percent.

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Evergrande missed two coupon payments on its dollar bonds on September 23 and 29, which started a 30-day deadline for payment. Failure to pay the interest could have resulted in a formal default by the company and default on other Evergrande dollar bonds.

Temporary relief for Evergrande

Evergrande is considered the world’s most heavily indebted real estate company. There is an urgent need to raise funds in order to be able to pay banks, suppliers and bondholders on time. The company is so big that some experts fear a “risk of contagion” for China’s economy and beyond.

The payment therefore means temporary relief for Evergrande. It gives the company more time to sell assets and raise cash to pay creditors and suppliers. Because in the coming weeks and months, further interest payments for bonds will be due.

This year the company has to pay interest on an additional four dollar notes and a significant amount of additional debt is due next year. According to analysts, there are still liabilities of more than $ 300 billion to be settled.

Analysts therefore only see the payments made as a breathing space for the heavily indebted group. “We’ve seen this before,” commented Justin Tang, Head of Asia Research at United First Partners in Singapore, on the interest payment. This “does not solve the company’s problem or change the fact that it is a living dead”.

More: The sale of the service division should have brought the heavily indebted company $ 2.6 billion. The risk of default increases.

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