Regulator Says Risk Contained, Shares Plunge: Evergrande Update
(Bloomberg) -- China’s banking regulator dismissed concerns that the crisis enveloping China Evergrande Group will have any major impact on the credit profile of the sector as a whole, as shares of the embattled developer nosedived on Thursday.
Evergrande is an “individual” case, Liu Zhongrui, an official at the China Banking and Insurance Regulatory Commission, said at a briefing in Beijing.
That came after Chinese developers led stock gains in Shanghai and Hong Kong after regulators said their funding needs are being met, soothing concerns over tight policies that have made industry giants suffer.
Offshore creditors, meanwhile, may seek a standstill and debt talks with Evergrande if it fails to make an interest payment by a Saturday grace period deadline, according to people with knowledge of the matter.
Evergrande shares earlier plunged as much as 14% after the company said it ended discussions to sell a stake in its property-management arm. REDD reported that the cash-strapped firm secured an extension of more than three months on a $260 million bond issued by Jumbo Fortune and guaranteed by the developer.
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Evergrande Secures Extension on Jumbo Fortune Bond: REDD
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Evergrande Shares Offer ‘No Value’ Without Cash Infusion: UFP
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Offshore Creditors May Seek Talks After Grace Period (1:20 p.m. NY)
Offshore creditors to Evergrande may seek a standstill and debt talks with the firm if it fails to make an interest payment by a Saturday grace period deadline, according to people with knowledge of the matter.
Bondholders, some of whom are getting advice from Kirkland & Ellis and Moelis & Co., aren’t planning to demand immediate repayment after the deadline in hopes that the company will come to the table to discuss options for the missed payment, said the people, who asked not to be identified discussing confidential matters.
Hopson Counters Evergrande on Collapse of Unit Sale (8:44 a.m. NY)
Hopson Development said Evergrande requested substantial changes to an agreement on the sale of a stake in its property-management arm after it was signed, including terms of payment, according to a filing to the Hong Kong stock exchange. The statement said there was “no substance whatsoever” in Evergrande’s reason for terminating agreement, which it announced on Wednesday.
China Vows to Keep Property Curbs, Evergrande Risk Seen Limited (4:25 p.m. HK)
China’s banking regulator vowed to keep its curbs on the nation’s property market, dismissing concerns that the crisis enveloping Evergrande will have any major impact on the credit profile of the sector as a whole.
The property controls have achieved good results and the government will refrain from using the real estate sector as a short-term economic stimulus measure, Liu Zhongrui, an official at the China Banking and Insurance Regulatory Commission, said at a briefing in Beijing on Thursday. Evergrande is an “individual” case and won’t hurt the overall credibility of Chinese firms, which is backed by the country’s economic stability, he said.
China Property Purge Hammers Weak Players While the Strong Gain (4:07 p.m. HK)
China’s property sector is undergoing its biggest credit-market shakeout in years as policy makers try to clamp down on over-indebted developers without infecting their healthier rivals.
Companies with the worst balance sheets are getting crushed by a spike in borrowing costs, a phenomenon that’s intensifying this month as bills come due. At least three Chinese developers have defaulted in October, one may struggle to pay interest due Friday and another failed to get a three-month extension for a note maturing Monday.
Evergrande Secures Extension on Jumbo Fortune Bond: REDD (1:15 p.m. HK)
Evergrande has secured agreement for an extension of more than three months on a $260 million bond issued by Jumbo Fortune and guaranteed by the developer, according to a REDD report citing two sources briefed by the bondholders. The agreement was reached earlier this week after Evergrande agreed to provide extra collateral and the developer will seek the Guangdong government’s opinion before making the delayed dollar coupon payments, the report said without identifying the source of the information.
Morgan Stanley Team Turns Bullish on China High-Yield (12:30 p.m. HK)
Morgan Stanley’s credit team says China’s high-yield bonds are pricing “unrealistic” downside risk, listing five reasons why it’s time to be bullish on the market.
Valuations are the cheapest globally, easing measures from the government are not yet reflected in prices, any systemic risk from defaults is manageable, fund flow demand remains positive, and Beijing will do more to support the sector, Kelvin Pang, a Hong Kong-based strategist at Morgan Stanley, wrote in an Oct. 18 note.
“Our base case view remains that as actual defaults for China’s HY property sector increase from here, the systemic risk arising from these defaults remains manageable,” Pang wrote.
China Property Easing Bodes Well for Developer Bonds, Goldman Says (12:15 p.m. HK)
Easing fiscal and monetary measures targeting China’s housing sector in select cities suggest policy direction may be changing and sets up an attractive backdrop for assets from the sector, according to Salman Niaz, head of Asian credit at Goldman Sachs Asset Management. Credit selection will be critical as timing, impact and transmission of these policies remain uncertain and there could be more defaults from the sector, Niaz said.
Asian high-yield dollar bonds are starting to look attractive after the recent selloff, with valuations potentially over-compensating for default risk and offering “multi-year wide carry” compared to U.S. peers.
China Developers Rally on Confidence From Regulators’ Remarks (12 p.m. HK)
Chinese developers led stock gains in Shanghai and Hong Kong after regulators said their funding needs are being met, soothing concerns over tight policies that have made industry giants like Evergrande suffer.
Property shares were the best performers in the two financial hubs, with gauges tracking the sector rising at least 2% as of 11:20 a.m. local time. China Resources Land Ltd. soared as much as 9.6% and Longfor Group Holdings added 7.9% to be among the top point contributors to the Hang Seng Index.
|Dollar bonds||Coupon due date|
|EVERRE 8.25% due 2022||Sept. 23||83.53|
|EVERRE 9.5% due 2024||Sept. 29||45.17|
|EVERRE 9.5% due 2022||Oct. 11||68.88|
|EVERRE 10% due 2023||Oct. 11||42.5|
|EVERRE 10.5% due 2024||Oct. 11||36.75|
|TIANHL 13% due 2022||Nov. 6||41.93|
|TIANHL 13.75% due 2023||Nov. 6||40.56|
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