Evergrande would have refunded another payment, again avoiding the default

By Laura He, CNN Business

For the second time this month, China’s most indebted developer Evergrande would have managed to avoid a default at the last minute.

The indebted company paid interest on a dollar-denominated bond that was due in late September, just after a 30-day grace period expired, according to the New York Times and Bloomberg. Each post cited anonymous sources.

CNN Business could not independently verify that the payment was made and Evergrande did not immediately respond to a request for comment. Interest owed was $ 47.5 million for a bond that expires in March 2024, according to data from Eikon Refinitiv.

Friday’s reports come a week after Evergrande allegedly paid $ 83.5 million in past due interest on a dollar bond – also shortly before a grace period expired.

It is not known where Evergrande gets the money to pay these debts. But some media have suggested that the company’s president, Xu Jiayin, is under pressure to dip into his own pockets to keep the company afloat.

Earlier this week, Bloomberg reported that Chinese authorities told Xu to use his personal wealth to pay off the company’s debts.

Local media in Hong Kong also reported, citing information from a local land registry, that Xu is using a town mansion as collateral to secure bank loans.

CNN Business could not independently check these reports. But this property is located in an incredibly expensive area of ​​Hong Kong. Neighboring houses are priced at around 700 million Hong Kong dollars ($ 90 million).

Evergrande’s mainland division, Guangzhou Kailong Real Estate, also sold six million shares, valued at 15.48 million yuan ($ 2.4 million), to a listed development group on Tuesday. in Shenzhen called China Calxon Group, according to a stock report from this company. Evergrande still owns about a fifth of this company through Guangzhou Kailong.

Evergrande still holds massive debt, however. Its total liabilities are around $ 300 billion. And the company still has $ 148 million in unpaid interest that was owed last month.

The company also made a few hundred million dollars in payments this year, including an interest payment of $ 14.25 million on a dollar bond that is due tomorrow, according to Eikon Refinitiv.

Evergrande shares fell 3% in Hong Kong on Friday.

A fault of Evergrande would likely trigger cross-defaults and send shock waves to other parts of the Chinese economy.

Evergrande contagion fears have unstable global investors in months, sparking massive sell-offs of equities in Hong Kong, New York and London.

Yields on offshore bonds issued by Chinese companies also surged, making it more difficult for these companies to raise funds.

And several small Chinese developers have defaulted on their debts abroad in recent weeks, including Fantasia Holdings, based in Shenzhen, and Modern Land, based in Beijing.

“Access to finance for Chinese real estate developers has tightened … significantly and rapidly in recent weeks, as banks and bond investors have grown suspicious of the real estate sector,” Moody’s analysts wrote in a report Thursday.

They added that property sales have also declined due to limited developer spending and buyers’ concerns about whether the properties will be completed.

Beijing seems to realize the risks of not honoring its debts abroad.

Tuesday, two major economic regulators have called on companies “in key sectors” to repay the principal and interest on their obligations abroad. The agencies said they wanted companies to pay off their foreign debts to protect their own reputations, as well as “the general order of the market.”

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