Evergrande makes onshore coupon payment: sources

Hong Kong

CHINA Evergrande Group has paid an onshore bond coupon due on Tuesday (Oct 19), four people with knowledge of the matter said, amid concerns about a possible offshore default by the cash-strapped developer later this week.

Hengda Real Estate Group, Evergrande's flagship unit, has remitted funds to pay an onshore bond coupon of 121.8 million yuan (S$25.6 million), the people said.

One of the people said Evergrande, China's No 2 developer, needs to prioritises its limited funds towards the domestic market where the stakes are much higher for the country's financial system.

The liquidity crisis at Evergrande, which has US$300 billion in debt and has missed a series in bond payments, has roiled global markets. High-yield bonds issued by Chinese property developers have been especially hammered.

An Evergrande bond due March 23, 2022, will officially be in default if the company does not make good after a 30-day grace period for a missed coupon payment that had been due on Sep 23.

But the offshore bond market has responded positively after the China central bank's assuring comment and coupon payments of two major developers.

An index of China high-yield debt, which is dominated by property developer issuers, has seen spreads tighten from last week's record levels to around 1,484 points on Oct 19.

Sunac China, which had a US$27.14 million payment due on Oct 19, has paid its bondholders, a source with direct knowledge of the matter said. The source was not authorised to speak to media and declined to be identified. A Sunac representative declined to comment.

Kaisa Group said on Oct 18 that it has paid a coupon due Oct 16 and it plans to transfer funds for a coupon worth US$35.85 million due Oct 22 on Thursday (Oct 21).

In the past few days, the People's Bank of China has said spillover effects on the banking system from Evergrande's debt problems were controllable and that China's economy was "doing well".

Bonds from Chinese developers that gained on Oct 19 included Modern Land's 2022 bonds which bounced over 8 per cent to 40.250 cents on the US dollar, while Central China Real Estate's 2024 bonds climbed over 5 per cent to 44.843 US cents.

On Oct 18, smaller developer Sinic Holdings defaulted on US$246 million in bonds as expected. It had warned of the default last week, saying it did not have sufficient financial resources. REUTERS