- Central bank makes rare comments on Evergrande’s debt situation
- PBOC: financial companies have no concentrated risk Evergrande
- Evergrande CEO discusses Hong Kong restructuring with banks
- Xinyuan Real Estate agrees to exchange offer with bondholders
- Evergrande has 1,300 projects in more than 280 cities
SHANGHAI, Oct. 15 (Reuters) – The ripple effect of the China Evergrande group’s debt problems on the banking system is controllable, a central bank official said on Friday in rare official comments on a liquidity crisis at the second Chinese developer who has shaken up the world markets.
Chinese authorities are urging Evergrande to step up asset divestitures and project takeovers, Zou Lan, head of financial markets at the People’s Bank of China (PBOC), said at a briefing, adding that individual financial institutions do not did not have a very concentrated exposure in Evergrande. . Read more
“In recent years, this company has not performed well and managed itself well. It has not conducted cautious operations according to the changing market conditions, and it has blindly diversified and expanded its activities,” said Zou said during a briefing in Beijing.
Chinese officials and state media have remained largely silent on the Evergrande crisis, which missed a series of bond interest payments and has $ 300 billion in debt, making it the most indebted developer in the world.
Zou also said real estate companies that have issued bonds overseas should actively meet their debt repayment obligations.
Evergrande has left its foreign investors in the dark about repayment plans after already missing three rounds of interest payments on its dollar bonds.
Zou’s comments came as sources told Reuters that Evergrande (3333.HK) CEO Xia Haijun was in talks in Hong Kong with investment banks and creditors over a possible restructuring and sale of assets. Read more
Xia had been in Hong Kong for more than two months, multiple sources told Reuters. Xia needed to communicate with foreign banks about loan extensions and repayments, one of the sources said.
Joining a list of real estate developers reeling from the debt crisis, China Properties Group Ltd (1838.HK) on Friday said it defaulted on notes worth $ 226 million.
Another Chinese developer, Xinyuan Real Estate Co’s (XIN.N) on Friday avoided a default on a maturing dollar bond, saying in a filing on the Singapore Stock Exchange that bondholders had accepted an offer of the bonds. ” accept new bonds and money in exchange for maturing notes. Read more
Xinyuan said that holders of more than 90% of the company’s $ 229 million notes due Oct. 15 have agreed to the exchange, which would allow it to deliver new bonds worth $ 205.4 million. dollars and $ 19.1 million in cash.
Xinyuan’s bond at 14.5% in September 2023 collapsed nearly 30% on Friday to trade at 58.35 cents, according to data provider Duration Finance.
The deal follows warnings from other developers that they could default on their obligations, while still others have taken steps to delay payments in the wake of Evergrande’s problems.
Evergrande, with 1,300 real estate projects in more than 280 cities, missed a third round of interest payments on its international bonds this week.
However, in a separate statement filed on the Shenzhen Stock Exchange, Evergrande said it would pay interest due Oct. 19 on a yuan-denominated bond it issued in 2020.
PBOC QUICKLY REQUESTS THE SALE OF ASSETS
During Friday’s briefing, Zou said Evergrande is expected to speed up asset divestitures and resumption of construction of projects, for which authorities will provide financial support.
Some lenders have had “misunderstandings” about the central bank’s debt control policies, causing financial strains for some developers as some new projects were unable to obtain loans even after repaying existing loans, a Zou declared.
âThis extreme short-term reaction is a normal market phenomenon,â he said.
Chinese developers face more than $ 500 million in coupon payments on their high yield bonds before the end of this month. Refinitiv data shows coupon payments by Kaisa Group Holdings (1638.HK) and Fantasia Holdings (1777.HK) are due this weekend. Read more
âIn some cities, real estate prices have risen too quickly, which has restricted the approval and issuance of personal mortgages,â Zou said, referring to the first nine months of this year.
“Once house prices stabilize, the supply and demand for mortgages in these cities will also be normalized,” he said.
Still, Evergrande suffered further setbacks on Friday, with sources telling Reuters that Chinese state-owned Yuexiu Property (0123.HK) withdrew from a proposed $ 1.7 billion deal to buy the company headquarters in Hong Kong due to concerns over the developer’s dire financial situation. Read more
Evergrande is trying to sell some assets to repay the creditors who knock on its doors and the failure of the talks shows the difficulties it faces.
Adding to his woes, the Hong Kong audit regulator said on Friday he was investigating Evergrande’s 2020 accounts and their audit by PwC because he had concerns about the adequacy of the reports on the possibility. to continue to operate as a business. Read more
Evergrande bonds fell in the wake of the Reuters report. The company’s bonds at 8.75% in June 2025 fell more than 6% to trade at a discount of more than 80% from face value, according to data provider Duration Finance.
THE WEAKENING OF BONDS deepens
Outside of Xinyuan, Duration Finance data showed other developers’ bonds were deepening their rout. Sinic Holdings Group’s June 2022 10.5% bond plunged more than 20% to just 12.25 cents, and Ronshine China Holdings’ February 2022 bond fell more than 6% to 68, 35 cents.
Moody’s has downgraded Risesun Real Estate Development Co Ltd (002146.SZ) to B1 / B2, with a negative outlook.
Spreads on Chinese high yield dollar corporate bonds (.MERACYC) hit a new record on Thursday evening US time after nearly tripling since late May, while investment grade spreads remained close to their larger in more than two months (.MERACCG).
Contagion concerns have also affected the shares of real estate developers this week. On Friday, an index listing the sector’s A shares (.CSI000952) gave up small gains to end up 0.1% lower, trailing a 0.38% gain in the blue chip index (. CSI300) and taking losses since Tuesday at 4.5%.
China has stepped up restrictions on the real estate market since late 2020, introducing new measures to closely monitor and control developer debt levels.
But with economic growth slowing and new construction slowing, speculation is rife as to whether it will begin to ease those restrictions, as it did in previous downturns.
Reporting by Andrew Galbraith, Cheng Leng, Kevin Yao and Tony Munroe, additional reporting by Alun John, Karin Strohecker and Noel Randewich; Editing by Kim Coghill, Jacqueline Wong and Nick Macfie
Our Standards: Thomson Reuters Trust Principles.