Chairman’s Aide Pledges Luxury Homes; Car IPO: Evergrande Update

(Bloomberg) -- China Evergrande Group Chairman Hui Ka Yan’s associate pledged two houses on the Peak in Hong Kong as collateral for a HK$821 million ($105 million) loan. That may help pay for overdue coupons on two bonds, Bloomberg Intelligence analysts led by Daniel Fan wrote.

Chinese high-yield junk notes declined 2 to 3 cents on the dollar Tuesday as some investors moved to pare risk after a robust rally, according to credit traders. 

And shares of Kaisa Group Holdings Ltd.’s listed property management arm tumbled as much as 17% after resuming trading in Hong Kong. The builder’s stock remains suspended and at least some of its creditors have yet to receive bond interest due last week. Fitch downgraded the Group’s long-term issuer default rating to C from CCC-.

A carmaker with no sales and ties to Evergrande, meanwhile, is tapping the electric-vehicle frenzy that’s gripped initial public offering markets.

Key Developments:

• Evergrande Chairman’s Aide Pledges H.K. Homes for $105m Loan
• Kaisa Group Cut to C by Fitch on Missing Interest Payments
• China USD Junk Bonds Fall as Much as 3 Cents, Set to End Rally
• Morgan Stanley Calls Peak on China High-Yield Bond Spreads
• Kaisa Prosperity Falls 17% After Trading Resumption
• Property Crackdown Is Dragging China’s Economy to 1990 Lows 
• Panic Is Fading Fast in Chinese Junk Dollar Bond Market

Solar Car IPO With Evergrande Ties to Ride EV Craze (10:35 a.m. NY)

A German solar carmaker with no sales and ties to troubled China Evergrande Group is tapping the electric-vehicle frenzy that has gripped initial public offering markets across the globe.

Sono Motors, which has developed an electric car with integrated solar panels to power its batteries, is seeking a valuation of more than $1 billion in a U.S. listing. One catch: It plans to outsource production to a former Saab factory in Sweden that’s now owned by Evergrande’s automotive arm. And there’s its lack of revenue, as well as doubts about the viability of solar-powered vehicles.

Evergrande Owner’s Home Pledge May Help Pay Coupon: BI (4:55 p.m. HK)

Evergrande’s major shareholder and Chairman Hui Ka Yan may pay for the overdue coupon of Tianhe 13% and 13.75% bonds with a $105 million loan borrowed against two luxury residences in Hong Kong, Bloomberg Intelligence analysts led by Daniel Fan write. The firm has a combined $83 million in overdue coupon payments for the two bonds before the grace period ends on Dec. 6. and another $255 million in payments for 7.5% and 8.75% bonds due on Dec. 28, according to the analysts. 

Evergrande Chairman’s Aide Pledges Homes for $105m Loan (4:50 p.m. HK)

Evergrande Chairman Hui Ka Yan’s associate pledged two houses on the Peak in Hong Kong to Orix Asia Capital as collateral for a HK$821 million ($105 million) loan, according to documents from the Land Registry and Companies Registry. Evergrande didn’t immediately respond to request for comment.

In a separate deal in October, Hui’s associate pledged a house to China Construction Bank as collateral for a loan.

Kaisa Group Cut to C by Fitch on Missing Interest Payments (4:12 p.m. HK)

Kaisa Group’s long-term issuer default rating was downgraded by Fitch to C from CCC-, and its senior unsecured debt rating was also lowered by Fitch.

The downgrade reflects the likelihood that Kaisa missed interest payments on its senior unsecured notes, Fitch said.

China USD Junk Bonds Fall as Much as 3 Cents, Set to End Rally (3:25 p.m. HK)

China’s high-yield junk notes declined 2 to 3 cents on the dollar Tuesday as some investors moved to pare risk after a robust rally, according to credit traders. 

That would end a two-day streak of gains through Monday, according to a Bloomberg index. 

Morgan Stanley Calls Peak on China High-Yield Bond Spreads (12:24 p.m. HK)

Spreads on China’s junk-rated property dollar bonds may have peaked, or at worst could peak in a couple of months, according to Morgan Stanley, which holds a bullish view on the sector and the broader Asia credit market next year. 

Investors shouldn’t fear “buying early into a problem sector,” credit strategist Kelvin Pang wrote in a research note dated Nov. 14, citing pricing that is currently “too extreme,” the prospect of policy easing, and attractive valuations. Developers’ refinancing schedules in December and January will provide more clarity on their liquidity and allow the market to “be more discriminate in credit pricing,” he said.

Kaisa Prosperity Falls 17% After Trading Resumption (10 a.m. HK)

Kaisa Prosperity falls as much as 17%, Kaisa Health jumps as much as 39% and Kaisa Capital Investment tumbled 13%, after resuming trading in Hong Kong Tuesday.

Panic Fading Fast in Junk Bond Market (8:48 a.m. HK) 

Signs of stability are emerging in China’s junk dollar bonds as bets on policy easing assuage concern over a wave of defaults by property firms. The notes are yielding less than 20%, down from a high of almost 25%, with a Bloomberg index tracking China’s junk dollar market erasing its November losses. 

China State-Run Developers Rush to Sell Yuan Debt (8:15 a.m. HK)

Chinese state-owned developers are about to test investor demand for yuan bonds with a flood of issuance.

China Merchants Shekou Industrial Zone Holdings Co., Poly Developments & Holdings Group Co. and Bright Real Estate Group Co. received approval to sell a combined 8.6 billion yuan ($1.3 billion) of local bonds on the interbank market this week. If successful, that would make November the strongest for issuance in eight months.

Positive demand for the bonds could prompt other property firms to follow suit, potentially easing a historic liquidity crunch in pockets of the real estate sector.

A look at Evergrande’s maturity schedule:

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