China's Evergrande Averts Default Crisis by Paying Interest on Dollar Bonds Due on the 23rd

Interest Payment One Day Before Due Date
Two Grace Period Expiry Dates Remain for Dollar Bonds

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] Evergrande (恒大·Ebeogeuraendeu), China's second-largest real estate developer facing bankruptcy with debt exceeding 300 trillion won, reportedly paid interest on its dollar bonds one day before the payment deadline. This move allows Evergrande to avoid an immediate default crisis.

According to local Chinese media on the 22nd, Evergrande completed the interest payment on its dollar bonds amounting to $83.5 million (approximately 98.5 billion won) one day ahead of the scheduled deadline on the 23rd.

The interest payment was reportedly made through Citibank.

Previously, Evergrande failed to pay interest on its dollar bonds by the maturity date of the 23rd of last month, pushing it into a default crisis.

If Evergrande failed to make the interest payment by the end of the 30-day grace period on the 23rd, an official default would have been declared. In particular, concerns grew as Evergrande, attempting to overcome its liquidity crisis by selling stakes in affiliates, saw the deal to sell a 50.1% stake in its real estate management affiliate Evergrande Property to real estate developer Hopson Development (合生創展·Hopson Development) collapse the day before, exacerbating the default risk.

However, by completing the interest payment one day before the deadline, it is analyzed that Evergrande has temporarily extinguished the urgent crisis.

Additionally, the maturity date of bonds worth $260 million (approximately 300 billion won) issued by Evergrande’s partner, Jumbo Fortune (鉅祥·Jumbo Fortune), was extended by at least three months the day before.

Previously, the $260 million dollar bonds issued by Jumbo Fortune, a company listed on the Hong Kong Stock Exchange, matured on the 3rd of this month. These bonds were declared in default. Evergrande Group is included as a guarantor for these bonds.

The problem is that Evergrande’s bond grace period expiration date is approaching again. Evergrande also failed to pay interest on its dollar bonds on the 29th of last month and the 11th of this month. If it fails to make interest payments by the expiration of these bonds’ grace periods, it will be unable to avoid default.