Is Evergrande bond default anxiety over?


  • Evergrande's financial hustle has a new twist.
  • The Chinese property group has avoided default.
  • Evergrande made a repayment to global bondholders; the domestic picture is still grim.

The global market speculation around China's Evergrande Group has come to a halt. The crisis on China's most prominent property developer has ended. It has recoiled from default risks. Evergrande is paying a bond coupon worth US$83.5 million before Saturday's deadline.

What happened at Evergrande?

Global investors have witnessed a months-long drama around Evergrande's probable default. Saturday would have been the peak of the drama as a 30-day grace period on bond coupon would expire. It has already missed the original payment date. However, the company has declared that it will pay back the US$83.5 million coupons to bondholders via a private transaction.

Much in the market air are rumours of Evergrande having remitted the coupon payments to a trustee account at Citibank on Thursday. It has reportedly already missed at least US$150 million payable to offshore bondholders. Back in September, Evergrande had agreed in a deal to pay domestic interest on time. The recent payment, however, is related to offshore bondholders. It has now reportedly repaid the overdue interest owed before the grace period expiry on 23 October.

As a result of this positive report by the Chinese media, shares of the troubled Chinese property giant Evergrande opened 6% high in Hong Kong.

The debt under question here was a humungous US$300 billion. It had thus wreaked havoc on global investor sentiments and fueled fears across economies about the default repercussions.

Also Watch- Evergrande founder's net worth takes a US$156 billion hit

Has China gotten over Evergrande default?

Evergrande is still not totally out of risk. China's biggest-ever corporate default can still trigger financial woes in the country. The current bond repayments are probably only a short-term fix. Another second offshore bond payment deadline is approaching soon.

The next bond payment would be worth US$47.5 million and is due next week. Evergrande has over US$300 billion of debt. It seems to have avoided only the tip of the iceberg. What's under can still make Evergrande's Titanic sink.

Bottom line-

Evergrande's total liabilities are around 2% of Chinese GDP. So, if the company sinks, it will probably take the entire Chinese economy deep down. It could even send indirect shockwaves to linked global markets.

Also Read- Why Falling Inflation Is Not Good News





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