© Reuters. Surveillance cameras are seen near the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song
HONG KONG (Reuters) -China Evergrande Group wired funds to a trustee account on Thursday for a bond interest payment due Sept. 23, a source told Reuters on Friday, days before a deadline that would have plunged the embattled developer into formal default.
Shares of Evergrande, which is saddled with more than $300 billion in liabilities, rose as much as 8% early on Friday.
Here’s what people are saying about the world’s most indebted developer, whose fate could ripple through global markets.
HONG HAO, BOCOM HEAD OF RESEARCH, HONG KONG
“It’s not a surprise that Evergrande has made the payment in the grace period, but it is one of many obstacles that it is facing. There are many, many liabilities that are due. The deal with Hopson to sell the property services company has fallen through, so they still have to come up with money somehow.
“If you look at the ‘three red lines’ policy released last year, there are a number of developers that fall into the red zone, and it is these developers which are seeing problems right now. I think we will see more default events coming through.”
WEI LIANG CHANG, MACRO STRATEGIST, DBS BANK, SINGAPORE
“In the short term, we believe the interest repayment should provide a fillip to Chinese risk assets, including the yuan and Chinese equities. Evergrande default risks, though not dissipated, have likely been deferred for some time.”
CASTOR PANG, HEAD OF RESEARCH AT CORE PACIFIC, HONG KONG
“The market is in ‘wait and see’ because Evergrande still has a large pile of debt with the next batch of default dates coming up soon. Its liquidity is so bad it’s questionable whether it can repay other debts.
“Its sale of the services unit failed and its September and October sales were getting worse and worse. It has very little cash. This repayment also doesn’t lift the sentiment of the sector, because those companies in cash crunch will still be struggling. The situation doesn’t change unless PBOC loosen more credits.”
MOH SIONG SIM, CURRENCY ANALYST, BANK OF SINGAPORE
“There is still a lot of scepticism. Bond prices have not picked up a lot. It’s a situation where they’ll try to keep it going until they can’t.
“What’s important is the property market, because they have a lot of projects under construction and the worst scenario would be if they go down and projects are left unfinished and that creates spillover for the economy. They have bought themselves some time.”
GARY NG, SENIOR ECONOMIST, NATIXIS, HONG KONG
“That Evergrande is able to fulfil its obligation after the grace period on the offshore bond is positive at least in the short term as it shows a certain commitment from the firm and provides a relief for offshore bond investors.
“However, they still have a bunch of deadlines coming up before the end of March. To fulfil all the obligations and the bond coupon payments they still need liquidity either from themselves or from offloading assets. Even though Evergrande managed to repay the coupon this time, it’s still quite challenging for them to meet all their future obligations.”
EDWIN FAN, ANALYST, FITCH, HONG KONG
“Evergrande is still under grace period for coupon payment. We will continue monitor the company’s coupon payment and debt restructuring situation in the future.”
TRAVIS LUNDY, QUIDDITY ADVISORS ANALYST, HONG KONG
“I expect it means they also plan to pay the offshore bond coupons due by the 29th. There’s no point in paying this one if you fully plan on not paying the next one six days later, but given the company’s self-reported cashflow difficulties, it is not clear how long they can keep that up.
“Given that we have little clarity on how bank financing is going for stalled real estate projects, but we know that project pre-sales are down a lot, the onshore business is unlikely to be supplying cash to Evergrande near-term. And I expect Hopson’s clarified response yesterday means lawsuits if Evergrande tries to sell Evergrande Property Services to someone else.”
LOUISE TSE, MANAGING DIRECTOR, WEALTHY SECURITIES, HONG KONG
The Evergrande rebound on Friday is still small compared to how much the stock has lost in the past few months. People are seeing that this could be a positive for the property development sector on the credit side. But I think for Evergrande, the share price could be hamstrung in the near term, there is still a lot more upcoming interest payments that have to be met.
“Investors will still be cautious because this issue is not just about Evergrande, we are talking about the health of the whole Chinese property sector.”