By Andrew Galbraith
SHANGHAI (Reuters) – Offshore bondholders from besieged developer China Evergrande Group were bracing for news on Monday of more than $ 148 million in looming bond coupon payments after the company missed two coupon maturities last month.
Expectations that the company will make the semi-annual payments on its April 2022, April 2023 and April 2024 notes due October 11 are slim as it prioritizes onshore creditors and remains silent on its dollar obligations.
This has left foreign investors worried about the risk of large losses at the end of the 30-day grace periods as the developer grapples with more than $ 300 billion in liabilities.
Evergrande’s troubles sent shockwaves through global markets and the company has already missed payments on dollar bonds, worth a combined $ 131 million, which were due on September 23 and 29.
Advisors to offshore bondholders said on Friday they wanted more information and transparency from the cash-strapped property developer.
Offshore bondholders are also asking for more information on Evergrande’s plan to divest some companies and how the proceeds would be used, the advisers said.
Trading in Evergrande shares, as well as its Evergrande Property Services Group unit, has been suspended since October 4 pending an announcement of a major deal. On Monday, the company’s EV unit fluctuated between big gains and losses, falling as low as 4.65% and rising to 9.28%.
Concerns of Evergrande contagion affecting the wider Chinese real estate sector spilled over into a massive sell-off of Chinese high-yield dollar debt last week, especially after small developer Fantasia Holdings Group Co missed the deadline. a debt payment of $ 206 million in the international market on October 4.
The option-adjusted spread of the ICE BofA Asian Dollar High Yield Corporate China Issuers index was last recorded at 2,069 basis points on Friday evening U.S time, its highest level on record .
Fantasia Group China Co on Monday said it would adjust the trading mechanism of its Shanghai-traded bonds following credit downgrades by China Chengxin International Credit Rating Co (CCXI), and said its parent company had formed a group emergency to resolve liquidity issues.
The move comes after the Shanghai Stock Exchange suspended trading in two of Fantasia Group’s exchange-traded bonds on Friday following steep falls, and echoes a similar adjustment in trading in Evergrande’s onshore bonds last month. .
“We believe that policymakers have zero tolerance for the emergence of systemic risk and aim to maintain a stable housing market, and political support could be provided if the deterioration in levels of property activity worsens,” said said Kenneth Ho, head of Asia credit strategy at Goldman Sachs. .
“Having said that, we also believe that policymakers don’t want too much stimulus, and their longer-term goal is to deleverage the real estate sector. Finding the right balance may take more time, and uncertainties are likely to be a continuing source of volatility for the Chinese (high yield) real estate market.
(Report by Andrew Galbraith, edited by Shri Navaratnam)