As global markets focus on China’s property developer, Evergrande stocks and bonds rise sharply after negotiating interest payments.
Shares of China’s struggling real estate development company, China Evergrande Group, rose sharply and dollar-denominated bonds rallied after the company negotiated interest payments on yuan-denominated bonds, eroding expectations that the company’s debt problem would be settled sporadically.
Evergrande rose 32 percent in the Hong Kong market, the hardest since 2009, while 250 million stocks changed hands. Hong Kong markets were closed on Wednesday for a holiday. The company’s 2022 maturity dollar bonds with an interest rate of 8.25 percent rose 4.4 cents to 29.6 cents.
Evengrade’s in-country real estate unit announced to the Exchange on Wednesday that the interest payment on one of its yuan-denominated bonds due the next day has been resolved through negotiations. However, the company did not specify in the statement how much interest will be paid and when the payment will be made.
Attention Turned to Payment
Justin Tang, head of Asia research at United First Partners, said: “Wednesday’s announcement showed that maintaining solvency is still on Evergrande’s agenda, and it also raised investors’ hope that lenders are open to a solution to some extent. That means a regular restructuring/negotiation for creditors at home and abroad is still between the cards, and this could give Evergrande the time it desperately needs.”
Investors have turned their attention to the $83.5 million coupon payment on the 2022 dollar bond of the world’s most indebted real estate company. The coupon of the 8.25 percent bond, which has a 30-day legal period to qualify the unpaid payment as default, is part of the $669 million bond interest due by the end of this year.
The important question in the markets is whether the company in crisis will be able to appease its global money managers or whether it will compromise, such as extending payments.