Evergrande real estate firm makes missed September bond payment, avoids default

October 23, 2021

China property giant wired USD83.5 million in interest owed in an offshore bond from September 23 on Thursday, temporarily averting, according to a Reuters source and Chinese newspaper .

The wire to a fiduciary account following a 30-day grace period came after assurances by various members of the Chinese government, Reuters reported. At a Beijing forum Wednesday, Chinese Vice Premier described the risks as controllable, and chairman of the   said that while authorities needed to curb excessive debt more broadly by "improv[ing] the effectiveness of the constraint mechanism on debt financing", the matter would be dealt with properly.

Once China's top real estate developer, Evergrande had accumulated approximately USD305 billion in liabilities, two per cent of the Chinese gross national product, after "dwindling resources" cut its value by 80%, according to Reuters. September data revealed Chinese home sales by value fell by nearly 17% year-on-year, according to The Guardian, and fears over its default led to a slowdown in China's third quarter GDP growth to a year low of 4.9%. Two sale negotiations with rival developers and Yuexiu, valued at USD2.6 billion and USD1.7 billion, respectively, were suspended, reportedly due to a lack of consent by the government of Guangdong province currently overseeing Evergrande's restructuring.

News of Evergrande's remittance caused its shares to rise by as much as 7.8% this morning after a two-week pause in trading for the anticipated sale of 50.1% in Evergrande Property Services Group, and offering some reprieve for bondholders, according to Reuters. Portfolio manager at GaoTeng Global Asset Management James Wong, interviewed by The Guardian, called the news "a positive surprise", adding "[i]f Evergrande pays this time, I don't see why it won't pay the next time." Jun Rong Yeap for Asia pte., interviewed by, said the report "overturned" the narrative "that Evergrande will face difficulty in securing cash ahead".

Further missed payments are due October 29 and November 11 after similar 30-day grace periods; including yesterday's USD83.5 million, nearly USD280 million is owed to bondholders.

Stocks have been down for many major Chinese developers: Reuters Wednesday reported year-to-date stock prices fell 87.8% for Sinic Holdings, currently in ' 'restricted default' after failing to make an October 18 bond payment valued, according to The Guardian, at USD246 million; 80.2% for Evergrande itself; 78.3% for E-House, 58.5% for and 54.6% for Kaisa Group, which defaulted in 2015 and had bonds reach record lows.

Estimates of the Chinese real estate market's size range from 16 to 25% of the Chinese gross domestic product, according to The Guardian. Chinese President Xi Jinping's aim to transform the country's economy from one of debt-fuelled "inflated" growth to one of improved "quality and returns" included imposing regulations on developers that limited their capacity to borrow. A Guardian comment piece from economist George Magnus published on October 15 made reference to China's "" and "rampant credit creation" that has given rise to high vacancy rates and the "financialisaton of housing".