Bondholders Didn’t Receive Interest Payments: Evergrande Update

(Bloomberg) -- Some holders of China Evergrande Group U.S. dollar bonds with coupon payments due Monday said they had yet to receive them, the latest sign of the property developer’s escalating debt crisis. 

The investors said they hadn’t received the coupons on the firm’s 9.5% note due 2022 and its 10% bonds due 2023 as of 5 p.m. in Hong Kong, requesting anonymity because they weren’t authorized to speak publicly. There is a 30-day grace period before any missed payment would constitute a default, according to at least one of the bond’s offering memorandum. 

Meanwhile, other Chinese developers sought to extend pay-back dates on their debt or offer new bonds for old as the fallout from the Evergrande saga tightened market liquidity and high-yield dollar notes from the country’s issuers sold off further.  

Modern Land (China) Co. is asking for a three-month extension on a dollar bond due Oct. 25, saying in an exchange filing that it’s looking to “improve our liquidity and cash flow management and to avoid any potential payment default.” Xinyuan Real Estate Co. has proposed paying just 5% of principal on a note due Oct. 15 and swapping the debt for bonds due 2023. Fitch Ratings called the move a distressed debt exchange and downgraded the firm to C.

The moves come as investors scrutinize the real-estate sector for signs of liquidity distress among developers, following Fantasia Holdings Group Co.’s unexpected default last week. Chinese high-yield dollar bonds extended last week’s ’s plunge, falling by as much as 10 cents on the dollar Monday, according to credit traders.  

Key Developments:

• Evergrande’s Audacious Founder Hunts for a Way Out of Crisis
• Credit Anxiety Is Coming for Your Stocks: What to Watch in China
• Evergrande Creditors Brace for Battle on Offshore Assets
• The Looming Bond Payments for China’s Most Distressed Firms

Some Evergrande Bondholders Haven’t Received Coupons Due Oct. 11 (10:10 p.m. HK)

Investors said they hadn’t received coupon payments on the Evergrande’s 9.5% note due 2022 and its 10% bonds due 2023 as of 5 p.m. in Hong Kong. Together with the payment due on a third bond -- a 10.5% note due 2024 -- Evergrande’s combined interest due on Monday was about $148 million, according to data compiled by Bloomberg.

Evergrande NEV Vows to Deliver Electric Cars Early Next Year (9:16 p.m. HK)

China Evergrande Group’s electric-car unit pledged it would deliver its first vehicle early next year, stepping up its commitment to mass production just weeks after admitting to serious cash-flow difficulties.

R&F May Sell Assets to Offset Sales Drop (5:30 p.m. HK)

Guangzhou R&F may sell more assets, including part of its 100 billion-yuan worth of investment properties and hotels, and stakes in some projects to plug the gap from a potential decline in contracted sales in coming months, according to Adrian Sim of Bloomberg Intelligence.

Contracted sales in September dropped more than 30% from a month ago although the first nine months’ total was marginally higher than a year earlier.

Guangzhou R&F’s dollar bond due January 2022 fell almost 10 cents on the dollar to 70 cents Monday, the biggest daily decrease since the securities were issued in December 2016.

Greenland’s Pre-Sale Permit Halted: Economic Observer (5:23 p.m. HK)

Eastern Chinese city of Jinan delayed pre-sale permits for Greenland due to the company’s recent delay in home deliveries, the Economic Observer reported, citing an unidentified official at the local housing authority. 

The municipal authority issued a statement saying Greenland’s home delivery delays “seriously” hurt the city’s property market order, according to the report. Greenland didn’t immediately respond when contacted by Bloomberg News.

China Junk-Rated Dollar Bond Rout Deepens Amid Builder Worries (4:20 p.m. HK)

Among the declines for high-yield issuers, China Aoyuan Group Ltd.’s 6.35% note due 2024 dropped 13.2 cents on the dollar to 57.5 cents, according to Bloomberg-compiled prices as of 4:22 p.m. in Hong Kong. Sunac China Holding Ltd.’s 6.5% dollar bond due 2026 declined 9.4 cents to 57.9 cents, leaving both poised to close at the lowest-ever levels. 

Yields on Chinese junk-rated dollar bonds surged 291 basis points to 17.54% last week, the highest level in about a decade, according to a Bloomberg index.

Ex-Evergrande Economist Says Firm Ignored His Warnings Over Debt (3:04 p.m. HK) 

Evergrande’s former chief economist said the developer ignored his repeated warnings to reduce debt and halt its plans to diversify into new businesses. Ren Zeping, one of the highest-paid economists in China who left Evergrande earlier this year, said he was often criticized internally for his suggestions, according to a post on his Wechat social media account. Ren’s post followed other social media comments suggesting he was part of the decision-making that led to Evergrande’s deepening crisis. 

Morgan Stanley Upgrades China Property on Likely Policy Easing (12:10 p.m. HK) 

Morgan Stanley has upgraded its view on China’s property sector to “attractive” from “in-line” as it sees growing likelihood of easing measures, with default risks and housing market weakness largely priced in. “We believe an inflection point for China’s property policy is approaching,” analysts led by Elly Chen wrote in a note dated Sunday. “Property stocks will react on policy easing, which looks more likely now.”  

China Property Needs Policy Adjustment to Restore Confidence: Goldman Sachs (11:47 a.m. HK)

The sector needs some kind of policy change in order to restore confidence, Kenneth Ho, Goldman Sachs’ head of Asia credit strategy said during an interview with Bloomberg TV on Monday. Ho says the sector could see more defaults amid the government’s deleveraging efforts, and “the market is pricing in a wider tail risk, which we don’t think is unfair.”

Fantasia Group China Cut to A From AA+ at China Chengxin (10:03 a.m. HK) 

China Chengxin International downgraded Fantasia Group China and put it on watch list for possible downgrade, according to a statement on Cninfo website. It added that parent Fantasia Holdings’ unpaid dollar bonds have significant negative impact on Fantasia Group China’s credit quality, Chengxin says.

Goldman Says Property Makes Up Almost a Quarter of China’s GDP (9:22 a.m. HK)

China’s property sector accounts for as much as 23.3% of the country’s gross domestic product if all business activities related to the industry are included, Goldman Sachs Group Inc. says in a report Monday. 

A wide range of estimates for the scale of China’s property sector -- up to about 30% of GDP -- have been reported by media and other analysts. The variation is mainly due to different definitions of the scope of the industry, according to the report. 

Modern Land Seeks to Extend Bond Maturity (8:15 a.m. HK)

Modern Land is seeking consent to extend the maturity of its 12.85% senior notes due 2021 by three months, according to the statement. It’s also asking for consent to redeem 35% of the bond’s principal on Oct. 25. The company said in a separate filing that Chairman Zhang Lei and President Zhang Peng intend to loan it about 800 million yuan ($124 million), a move expected to be completed in two to three months. 

Evergrande’s Reach Goes Way Past Just Building Homes (6:06 a.m. HK)

Evergrande is the biggest financial worry in China right now, and it’s fast becoming a problem outside of the nation’s borders. In a nutshell, the giant real-estate developer is $300 billion in debt and is widely expected to default on bond payments. The group owns 1,300 projects in more than 280 cities. But its reach goes way beyond building homes. Its billionaire owner Hui Ka Yan has his fingers in pies from electric vehicles and media production to mineral water and soccer.

Fantasia’s Default May Suggest Potential Issue Regarding Payment (6 a.m. HK)

The default on principal payments by Fantasia in the October bond maturity may indicate a potential issue to pay, given the company’s record of buybacks since May 2021, according to a report by Bloomberg Intelligence. This goes directly against the Chinese government directive on issuer conduct, risking severe consequences, the report said. 

The act could risk destabilizing the high-yield market further as fundamentals may no longer dictate default risks but may be offset by increasing bond buybacks from more reputable firms. 

Evergrande dollar bond interest deadlines:

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