Domestic Bonds

China Evergrande pays onshore coupons – sources

The company logo can be seen at the headquarters of the China Evergrande Group in Shenzhen, Guangdong Province, China on September 26, 2021. REUTERS / Aly Song

HONG KONG / SHANGHAI, Oct. 19 (Reuters) – China Evergrande Group (3333.HK) paid an onshore bond coupon due on Tuesday, four people familiar with the matter said, amid concerns over a possible offshore default by developer later this week.

Evergrande’s flagship unit Hengda Real Estate Group Co has handed over funds to pay off a 121.8 million yuan ($ 19 million) onshore bond coupon, residents said.

One of the people said that Evergrande, China’s No.2 developer, needs to prioritize its limited funds to the domestic market where the stakes are much higher for the country’s financial system.

The liquidity crisis in Evergrande, which has $ 300 billion in debt and has missed a series of bond payments, has shaken global markets. High yield bonds issued by Chinese real estate developers have been particularly hammered.

An Evergrande bond due March 23, 2022 will be officially in default if the company does not repay after a 30-day grace period for a missed coupon payment that was due on September 23.

But the offshore bond market reacted positively after reassuring comments from the Chinese central bank and coupon payments from two big developers.

A Chinese high yield debt index (.MERACYC), dominated by developer issuers, saw spreads tighten from last week’s record highs to around 1,484 points on Tuesday.

Sunac China (1918.HK), which has a payment of $ 27.14 million due Tuesday, paid its bondholders, said a source with direct knowledge of the matter.

The source was not allowed to speak to the media and declined to be identified. A representative for Sunac declined to comment.

Kaisa Group (1638.HK) announced on Monday that it had paid a coupon due on October 16 and planned to transfer funds for a coupon worth $ 35.85 million due on October 22 on Thursday.

In recent days, the People’s Bank of China has said that the ripple effects of Evergrande’s debt problems on the banking system are controllable and that the Chinese economy is “doing well.”

Chinese promoters’ bonds that won on Tuesday included Modern Land’s 2022 bonds which rebounded more than 8% to 40.250 cents against the dollar, while Central China Real Estate’s 2024 bonds climbed more than 5% to 44.843 cents.

Small developer Sinic Holdings (2103.HK) on Monday defaulted on $ 246 million in bonds as scheduled. He had warned of the default last week, saying he did not have sufficient financial resources.

Reporting by Clare Jim in Hong Kong, Samuel Shen in Shanghai, Shanghai Press Room and Beijing Press Room; Editing by Edwina Gibbs and Lincoln Feast

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