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 by AFP Staff Writers Beijing (AFP) Dec 7, 2021
Debt-laden Chinese property developer Evergrande has for the first time missed a deadline to repay some of its overseas creditors, a report said Tuesday, raising the prospect of it defaulting as it prepares for a government-backed mega-restructure. As a 30-day grace period on $82.5 million in overdue coupon payments ended Tuesday, Bloomberg News reported some bondholders had yet to receive payment, citing sources. The coupons were initially due on November 6 with a one-month grace period with Evergrande's initial default exacerbating already swirling concerns over its future and the wider Chinese property market. The Chinese government sparked a crisis within the property sector when it launched a drive last year to curb excessive debt among Evergrande and other real estate firms. Companies that had accrued huge debt to expand suddenly found the taps turned off and began struggling to complete projects, pay contractors and meet repayments. Evergrande, with a debt pile of over $300 billion, is the most prominent firm to have buckled under the crackdown, but others have also suffered. The real estate industry is a top growth driver for the world's second-biggest economy and the debt crisis has raised fears of a spillover into other key sectors. Evergrande has yet to comment on the bond repayments. As it scrambles to contain the fallout, the Chinese government is poised to take a leading role in the restructure, analysts told AFP. After Evergrande said on Friday it may not be able to meet its financial obligations, the government summoned the company's founder and announced several moves that have given the clearest picture yet of Beijing's plans to end the crisis. "Evergrande's disclosures and the ensuing government statements were well coordinated, pointing to formal beginning of Evergrande's debt restructuring," Nomura's chief China economist Lu Ting said in a note. He added the regulators' comments suggest "global investors should take responsibility for their own decisions to invest in Evergrande's dollar bonds and the Chinese government will not provide a hard guarantee to indebted companies like Evergrande." Evergrande announced Monday a new seven-strong "risk management committee" that would involve only two executives from the company, with others including officials from state entities. - 'Potential takeover' - Guangdong's provincial government is also sending a working team to the company, which analysts at Jefferies said indicated a "potential takeover of Evergrande". The working group is a clear sign of increased government control in the future of Evergrande, agreed Chen Long, partner at research firm Plenum. "(Founder) Hui Ka Yan actually will not be making the final decisions," he told AFP. "From an operational perspective... that working group will be in charge and will be making the most important decisions." Bloomberg News reported that Evergrande was planning to include all its offshore public bonds and private debt obligations in a restructuring, citing people familiar with the matter. The restructuring -- which has yet to start -- could cover public bonds sold by Evergrande and unit Scenery Journey, as well as $260 million of notes issued by joint venture Jumbo Fortune Enterprises, Bloomberg said. There have been signs the government is starting to ease property curbs. The central bank said Monday it would cut the reserve requirement ratio by 0.5 percentage points for most banks effective December 15, reducing the amount of cash they must hold in reserve and injecting 1.2 trillion yuan ($188 billion) into the economy. Top leaders also agreed to "promote the construction of affordable housing, support the commercial housing market and better meet the reasonable housing needs of buyers", state news agency Xinhua said.
Kaisa share suspension furthers China property sector fears The Chinese government sparked a crisis within the property industry when it launched a drive last year to curb excessive debt among real estate firms as well as rampant consumer speculation. Companies that had accrued huge debt to expand suddenly found the taps turned off and began struggling to complete projects, pay contractors and meet both domestic and foreign repayments. Kaisa, China's 27th-largest real estate firm in terms of sales but one of its most indebted, became the latest company to spook investors when it announced on Friday that it had failed in a bid for a debt swap that would buy it crucial time. On Wednesday morning the firm announced it was suspending trading in Hong Kong, where it is listed, "pending the release by the Company of an announcement containing inside information". It is the second time the company has suspended trading in the last month. Kaisa last month announced a plan to delay the repayment timeline for some of its bonds, offering an exchange for at least $380 million of notes, which would have given it some room to find money further down the line. But the offer failed to win the 95 percent approval from bondholders needed for the plan to go ahead. The company currently has some $11.6 billion of dollar notes outstanding. It previously defaulted on a dollar debt in 2015, becoming the first Chinese developer to do so. The most indebted Chinese property firm is Evergrande, which set off the current confidence crisis earlier in the summer. The Shenzhen-based behemoth racked up an eye-watering $300 billion in loans before Beijing began to rein in the sector. - Mega-restructure - On Tuesday, Evergrande missed a deadline to repay some of its overseas creditors, raising the prospect of it defaulting as it prepares for a government-backed mega-restructure. Bloomberg News reported some of the $82.5 million in overdue coupon payments it owed by the end of Tuesday -- when a 30-day grace period ran out -- remained unpaid. Ratings group S&P has predicted that a default by Evergrande is now "inevitable". Questions have swirled over whether Evergrande is simply too big to be allowed to fail, given its collapse could send shock waves through the wider Chinese economy. But signs now point to Beijing being willing to close the chapter on the 25-year-old real estate empire that has typified China's breakneck growth in recent decades. After Evergrande said Friday it may not be able to meet its financial obligations, the government summoned the company's founder and announced several moves that have given the clearest picture yet of Beijing's plans to end the crisis. A new seven-strong "risk management committee" has been set up to manage the restructuring. Only two executives from the company are on the committee -- others include officials from state entities. Guangdong's provincial government is also sending a working team to the company, which analysts at Jefferies said indicated a "potential takeover of Evergrande". Evergrande has yet to comment on the restructuring. Kaisa and Evergrande have become the most visible faces of the debt crunch within China's property sector but defaults have rippled throughout the sector. According to Bloomberg News, at least 10 lower-rated real estate firms have now defaulted on onshore or offshore bonds since the summer. So far this year, Chinese borrowers have defaulted on a record $10.2 billion of offshore bonds, Bloomberg reported, with real estate firms accounting for 36 percent of those non-repayments. Wealthy owners of at least seven Chinese real estate companies have also sold off some of their own luxury assets in recent weeks to help prop up their firms, Bloomberg added. But the latest troubles within the property sector did little to ruffle regional stock markets on Wednesday. Asian markets were mostly up across the region, including in Shanghai, while Hong Kong was trading flat by the lunchtime break.
China cuts reserve ratio, pledges housing support after latest default Beijing (AFP) Dec 6, 2021 China on Monday announced a reserve ratio cut and renewed support for the housing market as another Chinese property developer said it had defaulted on a major bond repayment. The central bank said it would cut the reserve requirement ratio by 0.5 percentage points for most banks, effective December 15. The move reduces the amount of cash the banks must hold in reserve, which will allow 1.2 trillion yuan ($188 billion) to be injected into the economy over the long term, the central bank said in ... read more
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