EVERGRANDE AVERTS DEFAULT

Property giant wires $83.5m to creditors one day before payment deadline

IN BUSINESS Evergrande made a key interest payment a day ahead of the weekend deadline.

China’s troubled property giant Evergrande has made a key interest payment a day ahead of a weekend deadline, state media said yesterday, averting default and buying the embattled company a reprieve as it struggles under a mountain of debt.

The crisis at one of the nation’s biggest property developers has hammered investor sentiment, rattled the key real estate market and fuelled fears of a spillover into the wider economy.

Evergrande is reported to have missed at least US$150 million (5 billion baht) in offshore bond payments and while it had a 30-day grace period on some of them, there had been a general expectation it would not be able to meet its obligations.

However, yesterday, state-backed Securities Times said the developer had wired $83.5 million for an overseas payment due on Sept 23, citing “relevant channels”. It said bondholders would receive the payout by today — the end of the grace period.

The news comes just a day after the company said the planned sale of its property services arm for $2.58 billion had fallen through and warned it could not guarantee it would meet its debt obligations, putting it on course for default and possible restructuring.

Fears about an Evergrande failure have rattled markets, and shares in the firm have collapsed more than 80% since the start of the year. It rose more than 4% yesterday in Hong Kong.

But observers warned the firm was still teetering, with several other dollar bond payments still to navigate before the end of the year.

“They may be able to pay this interest, and maybe they can pay another interest — basically they have an interest payment every two weeks or so — but at some point...there’s going to be an amount of principal maturing, and that one’s multibillion,” Chen Long, partner at research firm Plenum, said.

“If you look at the fundamentals of the company, that hasn’t changed.”

Beijing began last year clamping down on the country’s colossal property sector — estimates say it accounts for a quarter of the economy — in a bid to rein in excessive debt, with measures to restrict borrowing cutting off companies’ ability to complete projects.

While Evergrande is the standout, the moves have hit several other developers, with several including Sinic and Fantasia among those failing to make debt payments.

Still, Chinese leaders insist any fallout can be contained, but the crisis has prompted rare public anger and protests from anxious homebuyers, suppliers and investors.

But Chuanyi Zhou, credit analyst at Lucror Analytics in Singapore, said the latest news would give a short-term boost to the market but Beijing was not expected to step in to prop the firm up.

“Based on recent soundings, it seems the government, while keen for Evergrande to meet its obligations, is unlikely to provide support,” she said.

Authorities have reportedly asked local governments to prepare for Evergrande’s potential collapse, while analysts have said authorities had already taken control of some of its real estate projects.

“From a macro perspective, whether or not the dying husk of Evergrande survives is simply not important; what’s important is who assumes what liabilities, or not,” Leland Miller, the chief executive of data analytics firm China Beige Book, said.