Evergrande shares hit their highest ever percentage increase on the Hong Kong Stock Exchange after the ailing Chinese developer said it struck a deal with domestic bond holders.
The rise in stock prices on Thursday came after the indebted real estate giant issued a statement a day before saying it would pay interest on its 5.8% bond in September 2025 traded in Shenzhen on time Thursday. before its failure.
The amount owed for the national bond is estimated at $ 35.9 million (£ 26.3 million).
At the end of Thursday’s trading session, Evergrande was up 17% to HK $ 2.67, its largest one-day percentage rise since its IPO in 2009.
However, in the last year since its debt problems escalated, the value of the company’s shares has fallen by more than 80% from its peak value of HK $ 20 in July 2020.
The HKEX was closed on Wednesday due to a national holiday, so the effect of the statement was seen on Thursday.
Wednesday’s statement, however, did not reveal any details on how and when the interest on the domestic bonds will be paid. The statement said the payment problem “has already been resolved through private negotiations.”
On the same day, Evergrande Group Chairman Hui Ka Yan also assured that the company would make it a top priority to help retail investors buy back their investment products sold by the indebted real estate giant, Reuters the news agency reported.
The payment of the domestic bonds, as expected, was a major relief for investors as the anticipation of Evergrande defaulting on its owed interest wreaked havoc on Asian and global markets, with all major indices trading under pressure in beginning of the week.
However, the problems of the world’s most indebted developer continue to persist as he is due to make payments for two more offshore bonds this month. The cash-strapped real estate giant is due to make $ 83.5 million dollar bond interest payments due Thursday on a $ 2 billion offshore bond and further payments are expected next week, with a bond interest payment of $ 47.5 million due.
“The vague wording of the onshore bond and the lack of mention of the offshore bond in USD, whose interest payment is also due this Thursday, indicates that the company is still strapped for cash,” Robin said. Yu, Investment Researcher for RisCura, based in Hong Kong. The independent.
Under the investor agreements, both bonds have a 30-day grace period, after which they would default if Evergrande failed to settle the interest payments.
The potential collapse of Evergrande kept investors spellbound as the fall of China’s second-largest real estate company would have a domino effect on the Chinese economy and global markets in general. The company is in debt of $ 300 billion (£ 217 billion) after China tightened standards to cool a boiling real estate market, including introducing rent caps in major cities last year, which ‘she has so far not been able to repay.
“There is no short-term solution; they will most likely be faced with some type of Chapter 11 restructuring (where the business can continue to operate while negotiations with lenders determine who gets what, what parts can be sold, etc.), ”Yu said. .