Sunday, January 16

The proof of payment is coming; Junk Bond Rally: Evergrande Update

China Evergrande Group faces its biggest test as of Wednesday with $ 148.1 million in coupon payments due on three-dollar bonds, while the broader junk bond market rallied after a report that China may make it easier for firms to real estate companies sell debt.

In other developments, Evergrande’s electric vehicle unit sold shares at a steep discount, and Fantasia Holdings Group Co. plunged as much as 52% in Hong Kong after a six-week hiatus after the company’s surprise default.

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The Securities Times report on debt issuance rules sparked what would be the biggest jump in three weeks for China’s junk-rated dollar bonds. Higher-quality issuers such as Country Garden Holdings Co. and CIFI Holdings Group Co. saw some of their bonds rise more than 4 cents. Before Wednesday’s rally, a Bloomberg index for China’s high yield market had fallen 13 of the last 14 trading days, putting returns at 24.6%.

Key developments:

  • Fantasia sinks 50% after interruption of operations for a month
  • Why China’s real estate crisis is spreading: Shuli Ren
  • Evergrande electric vehicle unit to raise HK $ 500 million from share sale
  • China real estate investment at risk from Evergrande: BI
  • Chinese developer Kaisa delved into garbage as deadlines approach
  • S&P Downgraded Shimao Group Holdings; Negative outlook
  • China’s real estate crackdown reshapes developers’ business model: BI

Possible easing of China’s bonds to benefit top developers (2:30 p.m. HK)

China’s informed plan to loosen controls on local bond issuance by domestic real estate companies will likely help only higher-quality developers, analysts say.

Builders’ dollar ticket prices are set for their biggest jump in three weeks on Wednesday, as investors took the official Securities Times report positively. The article did not specify which rules would be relaxed, but said the easing would focus on the interbank bond market.

While the reported move is seen as an effort by authorities to calm stressed markets and boost confidence, analysts warn that it would open up refinancing channels only for China’s highest-quality developers, a signal sent by authorities in a meeting on Tuesday with such companies. Demand for lower-rated builders remains uncertain, analysts say, at a time when the liquidity crisis surrounding Evergrande continues to evolve.

China Fallen Angel Risks Flare as Shimao Cut to Junk (12:30 pm HK)

Major Chinese real estate developer Shimao Group Holdings Ltd. lost its investment grade rating on S&P Global Ratings, adding to concerns about a series of downgrades amid a real estate industry debt crisis that has already raised prices. borrowing costs for some companies at a decade high.

Shimao’s long-term rating was downgraded to BB + from BBB- with a negative outlook, according to an S&P statement on Wednesday. That reverses a move S&P made just seven months ago, when it raised the company to BBB-.

The developer is the 13th largest in China by contracted sales and is among the largest issuers of real estate debt with around $ 10.1 billion in local and offshore bonds outstanding. The company already has a trash Ba1 long-term rating from Moody’s Investors Service. It still has an investment grade rank of BBB- on Fitch Ratings.

Fantasia sinks after month-long business interruption (9:35 a.m. HK)

Fantasia shares opened 50% lower at HK $ 0.28 in Hong Kong after trading was suspended for more than a month. The developer’s woes have been mounting after two directors resigned the troubled Chinese developer last month and he defaulted on a dollar bond.

Evergrande faces proof of payment when grace periods end (8:20 a.m. HK)

Evergrande faces its biggest payment test since signs of a liquidity crisis emerged at the company five months ago.

Investors are waiting to see if the embattled developer makes coupon payments totaling $ 148.1 million for three-dollar bonds before the end of 30-day grace periods on Wednesday. Evergrande missed initial interest deadlines last month, data compiled by Bloomberg shows.

The expiration date looms as the stress on the credit market extends beyond China’s junk-rated builders. Higher-quality dollar bonds are suffering their worst sell-off in months, as investors increasingly worry about the impact on the largest real estate firms and the broader economy.

While there have been no indications that Evergrande will miss payment, any such development could also trigger cross-default clauses between the builder’s $ 19.2 billion in outstanding dollar notes and give creditors more room to negotiate. .

Developer CIFI plans to issue rights after bond market close (8:15 am HK)

With the bond market nearly closed for China’s beleaguered real estate industry, a developer is turning to shareholders for fresh capital to weather the storm.

The planned rights issue of Hong Kong-listed CIFI Holdings Group Co. offers a potential financing roadmap for Chinese real estate companies with highly concentrated ownership. CIFI, led by President Lin Zhong, is trying to raise up to HK $ 1.68 billion ($ 216 million), according to a document released Tuesday.

Rules for China’s Developers to Issue Bonds May Loosen: Report (8:13 a.m. HK)

China is likely to relax controls for domestic real estate companies to issue local currency bonds soon as part of efforts to prevent further deterioration in their funding, according to the official Securities Times.

The easing will focus on the interbank bond market, which has seen developers’ issuances drop in the past year. Banks and other institutional investors will resume “blood transfusions” for real estate companies through investment in bonds, the Securities Times said in a front-page report on Wednesday.

Authorities sent the policy signal in a meeting Tuesday between some developers and the National Association of Institutional Investors of the Financial Market, which reports to the country’s central bank and shares oversight of the issuance of corporate bonds in the interbank market.

Evergrande NEV to Raise HK $ 500 Million in Discounted Stock (8:10 a.m. HK)

China’s electric car unit Evergrande Group plans to raise HK $ 500 million ($ 64 million) in a stock sale, which it says will be used to put its long-delayed vehicles into production.

The shares were priced at HK $ 2.86 each, 20% off yesterday’s closing price, China Evergrande New Energy Vehicle Group Ltd. said in a statement Wednesday. That’s well below the record of HK $ 72.25 the shares hit in February, ahead of a sell-off as the unit’s parent company struggled to avoid collapse.

In September, Evergrande NEV warned of a severe funding shortage, saying it had suspended payment for some of its operating expenses and some suppliers had stopped working, fueling concerns that it might not be able to start mass production of its long awaited electrical product. vehicles.

A look at Evergrande’s maturity schedule:

Dollar bonds Coupon expiration date Grace period ends Amount

(A million dollars)

EVERRE 9.5% due in 2022 October 11th November 10 68.88
EVERRE 10% maturing in 2023 October 11th November 10 42.5
EVERRE 10.5% due in 2024 October 11th November 10 36.75
TIANHL 13% due 2022 November 6th 6th of December 41.93
TIANHL 13.75% due in 2023 November 6th 6th of December 40.56
EVERRE 7.5% due in 2023 December 28th January 27th 50.43
EVERRE 8.75% due in 2025 December 28th January 27th 204.77

© 2021 Bloomberg

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