Thu. Jan 20th, 2022

A failure to make $ 82.5 million in interest payments would represent the developer’s first foreign default.

Some China Evergrande Group foreign mortgage holders did not receive coupon payments by the end of a 30-day grace period on Monday New York time, four people with knowledge of the case said.

A failure to make $ 82.5 million in interest payments due last month could represent the developer’s first foreign default on a public mortgage.

Such a default would cause cross-payments on all of the company’s approximately $ 19 billion worth of bonds in international capital markets and put Evergrande at risk of becoming China’s largest defaulter ever, which would ripple through the real estate sector and beyond, raising global investor confidence further. .

Earlier Tuesday morning, Evergrande withdrew its share by as much as 8.3 percent, after losing 20 percent the day before.

The developer said Monday he had set up a risk management committee that included government entity officials to help “mitigate and eliminate future risks”.

This came after it said earlier creditors had demanded $ 260 million and that it could not guarantee funds to repay debt. This prompted the authorities to summon its chairman and reassure markets that greater risks could be curtailed.

Unlike a few months ago, the Evergrande outbreak was widely trapped in China and with policymakers in Beijing becoming more pronounced and markets becoming more well-known, the consequences of its problems will be felt less widely, investors said.

By Tuesday afternoon (04:00 GMT), Evergrande shares – which reached a record low on Monday – had reduced gains to 0.6 percent, leaving them at 1.82 Hong Kong dollars ($ 0.24).

Notes due on November 6, 2022 – one of two portions approaching the deadline for payment – traded at 18,282 cents on the dollar, Duration Finance data showed, little changed from Monday.

Other issues, including a 2024 bond, traded at record lows.

The firm is just one of a number of developers starving for liquidity due to regulatory restrictions on lending, leading to foreign debt default and credit rating downgrades, while investors have sold developers’ shares and bonds.

CHINA SHENZHENChinese real estate developer Kaisa also runs the risk of default [File: Qilai Shen/Bloomberg]

Smaller counterpart Kaisa Group Holdings Ltd – China’s largest foreign debtor among developers after Evergrande – also runs the risk of defaulting on a $ 400 million bond that expired on Tuesday after failing to reach an agreement with bondholders.

To avoid a total default, mortgage holders who own more than 50 percent of 6.5 percent notes payable on Dec. 7 sent Kaisa draft terms late Monday to work toward a solution, a person with immediate knowledge of the case told the Reuters news agency. Kaisa began discussing tolerance with mortgage holders last week, the person said.

Another person with direct knowledge said discussions are in a preliminary stage and that it will take time to finalize terms.

The people refused to be identified as the information was confidential.

In response to Reuters’ request for comment, Kaisa said it was open to discussion on tolerance, without elaborating.

Sources previously told Reuters that the mortgage holders offered Kaisa $ 2 billion in financing last month, but that no significant progress had been made with the offer.

Shares of Kaisa – the first Chinese developer to default on a foreign bond in 2015 – rose 3.3 percent on Tuesday.

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