China Evergrande Group EGRNF 7.41% made an overdue interest payment to international bondholders, the state-owned Securities Times reported Friday, an unexpected move that allows the property company to stave off a default.
The Chinese real-estate developer on Thursday sent $83.5 million to the trustee for the dollar bonds, and that financial institution will in turn pay bondholders, the Securities Times reported. The financial paper is run by the Communist Party’s flagship People’s Daily newspaper.
Evergrande was nearing the end of a 30-day grace period before bondholders could send a notice of default to the company after it failed to make the interest payment on about $2.03 billion of dollar bonds on Sept. 23.
A default on those bonds would likely have spiraled into the biggest corporate default in Asia, by enabling creditors to declare defaults on some of Evergrande’s other debts. The company is one of China’s biggest developers, and its most indebted. It had the equivalent of more than $300 billion in total liabilities, including some $89 billion in interest-bearing debt, as of the end of June.
Many international bondholders had expected Evergrande to fail to make its dollar bond payments before the end of the grace period. The company has also skipped other coupon payments in the past few weeks, and has outstanding dollar debt with a total face value of about $20 billion.
The coupon payment was a positive surprise, said Paul Lukaszewski, head of corporate debt for the Asia Pacific region at asset-management firm Abrdn.
“The most important takeaway from Evergrande making the offshore interest payment is that the company is treating its onshore and offshore bond creditors the same for the time being,” he said.
Still, Evergrande has to pay an additional $45 million by Oct. 29, when the grace period on another missed interest payment ends, said Iris Chen, a credit analyst at Nomura. “This does give them extra time, but it’s only buying them a few days unless they already have funds for the next coupon, which is due next Friday. They’re not out of the woods for sure,” she said.
Advisers to international bondholders said this month they had made little progress in their efforts to engage with Evergrande. On Wednesday, however, the Shenzhen-based group said in a regulatory filing that it will “use its best effort to negotiate for the renewal or extension of its borrowings or other alternative arrangements with its creditors.”