(Bloomberg) — Holders of the dollar bonds of the China Evergrande Group have been on edge after the ailing developer failed to show signs of meeting a Thursday deadline for an $83.5 million coupon payment. European banks are trying to reassure investors that their exposure is limited, while the staff of the company’s electric car operations have not been paid.
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Evergrande stocks and bonds traded lower after rallying 17% on Thursday. Shares fell 7.1% to HK$2.48 by midday in Hong Kong. China Evergrande New Energy Vehicle Group plunged a whopping 23%. Evergrande’s dollar 8.25% bond maturing in 2022 fell 2.4 cents against the dollar to 29.6 cents, according to Bloomberg’s compiled prices. It jumped the most in 18 months the day before.
These are the latest developments at the Chinese real estate giant:
PBOC keeps liquidity flowing amid Evergrande woes (11:53am HK)
The People’s Bank of China continued to pump money into the financial system over fears that contagion from Evergrande will affect market liquidity.
It has injected net 460 billion yuan ($71 billion) of short-term money into the banking system over the past five business days, including 70 billion on Friday.
Housing sector risks fall into bear market, Citi warns (11:46am HK)
House prices are at risk of a “meaningful downtrend” no matter what happens to Evergrande, analysts at Citigroup said in a note titled “A Bear Market in Chinese Property.”
“It seems clear that even with an orderly restructuring, the real estate sector in China is likely to face downward pressure,” analysts, including Dirk Willer, wrote in a note on Thursday. “While authorities are trying to limit the lower property prices resulting from Evergrande’s sale by introducing price floors, price controls usually don’t work.”
Lukewarm signal from land sale Impact of real estate crackdown (11:28am HK)
The real estate crackdown and the crisis in Evergrande are showing more signs of a cooling market after land auctions in several cities received lukewarm interest. Nine out of 10 plots of land in Hangzhou, home of the Alibaba Group, have recently gone unsold in its second round of centralized land offers, the Securities Daily reported. In January, all four lots in the eastern city were auctioned at the upper limit of the prices set by the local authorities.
Evergrande bondholders say they will still receive interest (10:15 a.m. HK)
Three holders of a China Evergrande dollar bond with a coupon due Thursday said they had not paid by 8am Hong Kong time on Friday. There was no immediate response from Evergrande to questions about the interest payment. The holders have asked not to be identified as the case is private
Evergrande remains silent on bond interest payment (8:35 a.m. HK)
The lack of any announcement from Evergrande regarding an $83.5 million interest payment owed Thursday on a dollar-denominated bond adds to the uncertainty surrounding the developer’s battle.
Asia’s largest issuer of junk-rated bonds has so far made no IPO or public announcement about the coupon. Evergrande, the most indebted developer in the world, has a grace period of 30 days to make the payment before a possible default can be declared. Investors have estimated a significant chance of a missed payment or a small fraction of face value in a potential restructuring.
China urges Evergrande to avoid default and repay retail investors
Financial regulators in Beijing issued a broad set of instructions to Evergrande, encouraging the embattled developer to take all possible steps to avoid a near-term default on dollar bonds while focusing on completing unfinished properties and paying them back. from individual investors.
In a recent meeting with Evergrande representatives, regulators said the company must proactively communicate with bondholders to avoid default, but did not provide more specific guidance, a person familiar with the matter said.
There is no evidence that regulators have provided Evergrande with financial support for the payment of the bonds, and it is unclear whether officials believe the company should ultimately impose losses on offshore creditors. Policymakers are trying to learn more about who owns Evergrande’s bonds, the person said, asking not to be identified while discussing sensitive information.
Banks race to ensure markets Evergrande exposure is limited
European bankers in recent days have reassured investors, customers and regulators about the potential fallout from Evergrande, as questions arise about the world’s most indebted property developer.
Credit Suisse Group AG, which has underwritten the most Evergrande bonds among international banks in the past 10 years, has issued statements showing that its asset management unit’s funds did not hold much of the developer’s debt. It has also reached out to shareholders about the bank’s own minimum exposure level, according to a person who was aware of the discussions.
UBS Group AG’s risk is “immaterial” and limited to the execution of collateral requests on margin loans, Chief Executive Officer Ralph Hamers said Thursday. That came a day after Noel Quinn of HSBC Holdings Plc at a Bank of America Corp. said he is not concerned about the bank’s direct ties to Chinese real estate.
Evergrande’s EV Unit Has Stopped Paying Staff, Factory Suppliers
China Evergrande’s electric car unit has missed salary payments to some of its employees and has fallen behind in paying a number of factory equipment suppliers.
The cash flow problems mean that China Evergrande New Energy Vehicle Group Ltd. likely miss its target of starting mass deliveries next year as pilot production of electric vehicles at its factories in Shanghai and Guangzhou has been called back, people said, asking not to be identified as they are not authorized to use publicly. to speak.
Most employees at Evergrande NEV are paid at the beginning of each month and again on the 20th, but for some middle managers, the second installment for September has not arrived, people said. Several equipment suppliers, meanwhile, began withdrawing their on-site staff from their Shanghai and Guangzhou sites as early as July after payments for machines at Evergrande NEV’s plants were not made.
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