Relief for markets as China’s Evergrande agrees payment to avoid default on key domestic bond

China’s indebted real estate giant Evergrande has said that it will make a coupon payment on its domestic bond on Thursday, in a major relief to Asian and global markets that have been jittery over the anticipation of China’s second-biggest developer defaulting on its due payments.

The Evergrande group’s main unit, earlier known as Hengda Real Estate Group, said in a statement on Wednesday it would make the coupon payment on its Shenzhen-traded 5.8 per cent September 2025 bond on time on 23 September.

The announcement of the coupon payment on domestic bond comes after markets globally have been tense in anticipation of a possible default on the interest due by the cash strapped company which was once the country’s top-selling developer, fearing a domino effect from its collapse.

Hengda Real Estate’s coupon payment totals $35.88m (£26.2m), according to Refinitiv data.

The assurance of payment on its onshore bond is set to provide some relief to investors. However this is not the end of the troubles facing the world’s most indebted real estate developer, as it is still due to make an $83.53m (£61m) payment on Thursday on an offshore bond.

The Shenzhen exchange filing on Wednesday did not mention the coupon payment on the offshore bond, according to Reuters.

Another interest payment of $47.5m (£34.8m) is supposed to be paid by the company on 29 September for March 2024 notes. Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

“We are still trying to understand what this payment means for the other bonds but I imagine they would want to stabilise the market and make other coupon payments, given the close scrutiny,” an unnamed source familiar with the situation was quoted by Reuters as saying.

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Evergrande has a total debt of $300bn (£217bn) which makes it the world’s most indebted company, and it has struggled to keep up with its debt obligations so far.

Evergrande’s debt woes were exacerbated when Beijing imposed new rules last year cracking down on borrowing from real estate developers, placing limits on mortgage lending and caps on rents in big cities. The company initially offered discounts on its properties to continue sales and ended up in heavier debts.

As China’s second-biggest real estate company, experts have said that the possible fall of Evergrande would have a far-reaching impact on China and global markets.


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