Markets await Evergrande’s $50m offshore debt deadline as global shock fears ease
- Chinese property giant faces $47.5m payment after missing $83.5m last week
- Evergrande owes £305bn and is set to be one of China’s largest restructurings
- Concerns of contagion eased in recent days as Chinese officials step in
Chinese property developer Evergrande Group faces the deadline for a $47.5million bond coupon payment to offshore investors today, as fears of its potential impact on global markets persist.
Evergrande, which in total owes $305billion, has been forced to sell $1.5billion of assets to a Chinese state-owned bank to pay onshore creditors amid its spiraling debt crisis.
The firm missed an $83.5million interest payment on a dollar-denominated bond last week, and its silence on offshore payment obligations has left global investors facing heavy losses.
Evergrande is now expected to be one of the largest ever Chinese debt restructurings
‘We are in the wait and see phase at the moment. The creditors are organising themselves and people are trying to figure out how this falling knife might be caught,’ an advisor hired by one of the offshore Evergrande creditors told Reuters.
‘They failed to pay last week, I think they will probably fail to pay this one. That doesn’t mean necessarily they’re not going to pay.’
Rating agency Fitch downgraded Evergrande’s long-term foreign-currency issuer debt on Wednesday from ‘C’ to ‘CC’, meaning the firm is likely to have missed an interest payment on a portion of its debt and it has a 30-day grace period before non-payment constitutes default.
Evergrande, which is now expected to be one of the largest ever Chinese debt restructurings, is prioritising domestic creditors over offshore bondholders.
The Evergrande debt crisis has fuelled fears that problems could spread through China’s financial system and reverberate around the world. However, this concern has eased somewhat in recent days.
Eva Sun-Wai, fund manager at M&G Investments, explained that ‘thus far’ the damage ‘remains reasonably contained and limited mostly to the Chinese high yield property sector, with policymakers and regulators stepping in to try to limit the impact on homeowners’.
She added: ‘We have seen some assets selling off in response to the heightened uncertainty, especially Asian equities and FX but also broader emerging market assets, as investors seem to be once again flying to the safe haven currency of choice, the US dollar.’
Moves from the Chinese central bank to support the property sector have even improved sentiment towards Chinese property stocks in the last couple of days, with Evergrande stock rising as much as 15 per cent earlier today.