December 4, 2021

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Evergrande Group, on the verge of default after a new maturity of US$148 million

Evergrande Group, on the verge of default after a new maturity of US$148 million

Some creditors with China Evergrande Group’s bonds had not received the coupon payments at the end of a 30-day grace period at the close of business in Asia on Wednesday, sources said, pushing the mega promoter to the brink of non-payment.

Evergrande, the world’s most indebted real estate developer, has been oscillating between payment terms in recent weeks as it grapples with more than $300 billion in commitments, of which $19 billion is in international bonds.

The company hasn’t defaulted on any of its external debt obligations, but a 30-day grace period for repayment of more than $148 million in coupons in April 2022, 2023 and 2024 bonds expires Wednesday.

If it doesn’t pay, the company will formally default and cross default provisions for other Evergrande dollar bonds will be triggered, exacerbating the looming debt crisis over the second economy. From the world.

It is not clear exactly when the grace period will expire on Wednesday, but two sources familiar with the matter said that some bondholders had not received payments by the end of the Asian business day.

The sources did not want to reveal their names because they are not authorized to speak to the media. Evergrande declined to comment.

“The expectation is that it will pay off,” said Carl Clory, a restructuring advisor and partner at Addleshaw Goddard LLP, also pointing to a possible easing in the coming weeks of the “three red lines,” fiscal requirements that the central bank has imposed in the past. General.For developers to obtain new bank loans.

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“It would be a huge surprise if the funds did not flow to the trustee in the required time frame, given the immediate default and the domino effect on suppliers and the property market in the People’s Republic of China in general.”

Real estate problems in China rocked global markets in September and October. There was a brief lull in mid-October after Beijing tried to reassure markets that the crisis would not get out of control.

However, concerns resurfaced, and the US Federal Reserve warned on Tuesday that China’s troubled real estate sector could pose global risks.

More and more promoters are seeing their credit rating drop due to the deterioration of their financial profile.

Concern about the potential fallout from Evergrande has also rocked the Chinese real estate sector in recent days, hitting corporate real estate bonds amid fears the crisis is spreading to other markets and sectors.