Evergrande set to avoid default after paying overdue interest

Customers of international clearing firm Clearstream received overdue interest payments on three US dollar bonds issued by Evergrande. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Property developer China Evergrande Group looks set to avert another default in its biggest test since its debt crisis began.

Customers of international clearing firm Clearstream received overdue interest payments on three US dollar bonds issued by Evergrande, a spokesman for Clearstream said. Two investors that hold two of the bonds confirmed that they received the payments, asking not to be identified because they were not authorised to speak publicly.

Investors had been waiting to see if the embattled developer would make the coupon payments totalling US$148.1 million (S$200.3 million) before the end of 30-day grace periods on Wednesday (Nov 10). Evergrande missed the initial interest deadlines last month, Bloomberg-compiled data shows.

The affected bonds include a 9.5 per cent note due in 2022, 10 per cent bonds due in 2023, and its 10.5 per cent note due in 2024.

The property giant pulled back from the brink of default in October by paying other coupons before the end of their grace periods.

But the crisis at Asia's largest junk bond issuer is hardly over, as it grapples with more than US$300 billion in liabilities. A string of other developers has also fallen into distress amid a crackdown on speculation and leverage following years of debt-fuelled expansion. The contagion has even spread to other areas of the credit market.

On Monday, two holders of other dollar notes sold by a unit of Evergrande said they had not received payment for coupons that were officially due last Saturday. Both of those coupons also have a 30-day grace period before any missed payment would be considered a default.

A representative for Evergrande did not immediately respond to a request for comment sent outside normal business hours.

The authorities have sought to limit the fallout from the wider property market distress, with the central bank injecting liquidity into the financial system. Chinese developers' bonds and stocks rallied on Wednesday after the Securities Times said the authorities are likely to loosen controls for the nation's real estate companies to issue local currency notes, part of efforts to prevent a further deterioration in their financing.

But concerns persist. Defaults and downgrades in the property industry in recent weeks have pushed yields on junk dollar bonds from Chinese issuers to the highest in at least a decade over 24 per cent.

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