Evergrande faces first big post-default bond coupon test

BEIJING • China Evergrande Group faced an initial interest payment deadline for two US dollar bonds yesterday, in the property giant's first major test of investor confidence after it was officially labelled a debt defaulter.

The embattled firm has US$50.4 million (S$68.3 million) worth of coupon payment due on a 7.5 per cent 2023 bond and another US$204.8 million tied to a 8.75 per cent 2025 note, according to Bloomberg-compiled data.

Evergrande has a 30-day grace period to deliver the payments before a default can be declared, according to a bond issuance document seen by Bloomberg News.

The imminent debt obligations come after major international rating firms formally described Evergrande as a defaulter earlier this month, following a series of payment failures on dollar notes.

The developer said last week that a newly established risk-management committee is utilising its extensive resources to defuse risk and protect the interests of all parties.

China's central bank governor said earlier this month that Evergrande's debt woes will be dealt with in a market-oriented way, signalling Beijing's reluctance to bail out the firm as it strains under more than US$300 billion in liabilities.

Another Chinese developer in trouble, Shimao Group, said its flagship unit plans to use its own capital to make onshore bond payments due in the next three months, and it is in talks to sell its commercial and hotel assets.

Shanghai Shimao also said it will be difficult to meet its 38 billion yuan (S$8 billion) full-year sales target, as sales in the first 11 months were 28.2 billion yuan.

The firm published the comments made to investors in a filing on Monday.

Shimao saw sharp falls in its shares and debt this month, triggered by worries over an asset sale and cancelled apartment deals, as well as downgrades by rating agencies on increased financing risks.

Shanghai Shimao also caused further worries when it said earlier that it had sold its property management business to sister company Shimao Services for 1.7 billion yuan, at a valuation some analysts said was higher than market average.

The firm said in the Monday filing that the proceeds are for developing and operating its commercial complex, not repaying debt.

Separately, Shimao Services, the group's property management arm, said in a filing last Friday that it is operating steadily, and that it will not conduct any major assets disposal or acquisition with the parent company in the next six months.

BLOOMBERG, REUTERS