Focus on Two Dollar Bond Coupon Payments: Evergrande Update

Elias D. Lafrance

(Bloomberg) — The debt market is focused on whether coupon payments were made on two dollar notes that China Evergrande Group had due Tuesday, both with a 30-day grace period before a default can be declared. 

Chinese companies reduced investment and remained reluctant to borrow in the fourth quarter, with small business’ financing costs soaring despite favorable policies, the Beige Book showed. While there was a surprising improvement in the property industry from the third quarter, an easier credit environment seen in November reversed this month, according to the report.

Evergrande has been turning its attention to delivering homes and paying workers even as debt payments loom. Its shares, which lost most of their value this year, advanced as much as 10% on Tuesday. The embattled developer was labeled a defaulter by international ratings firms for the first time earlier this month after it failed to repay liabilities on time.  

Key Developments:

  • Evergrande Faces First Big Post-Default Dollar Bond Coupon Test
  • Evergrande Races to Restart Projects as Debt Repayments Loom
  • Yango’s Parent Is Newest China Defaulter as Property Woes Deepen
  • China’s Central Bank Vows Greater Support for Real Economy

Chinese Firms Slowed Investment, Unwilling to Borrow: Beige Book (7 a.m. HK)

Amid an environment of reduced investment, only the retail and manufacturing sectors borrowed more this quarter compared with the previous three months, China Beige Book International said in a report released Wednesday, while services growth slowed “across the board.”

In addition, it became more expensive for smaller firms to borrow, with the gap between the interest rates on loans for small and large companies surging to 2.73 percentage points, the highest level since the survey began in 2012, according to the report.

That’s despite a series of policies aimed at helping smaller companies, and the central bank guiding overall credit growth to pick up in November to counter a slowing economy dragged down by a property downturn and sporadic Covid-19 outbreaks. 

China’s Stable Economy Clouded by Property and Export Outlook (5 a.m. HK)

China’s economy expanded at a moderate pace in the final month of the year, supported by better business sentiment, easing factory inflation pressures and faster car sales. However the slumping property sector and slowing external demand are clouding the outlook for the world’s second-largest economy. 

That’s the outlook from Bloomberg’s aggregate index of eight early indicators for this month. The overall number stayed unchanged in December, indicating the economy is still improving at a stable pace, but there are mixed signals from some of the real-time economic data.

Minsheng Says Evergrande Added Collateral (5:18 p.m. HK, Dec. 28)

Evergrande has offered additional collaterals and guarantees for some outstanding loans from China Minsheng Banking Corp., the lender said in response to investor inquiries on a platform run by Shanghai stock exchange.

The collaterals include property project companies’ stakes. Minsheng said all loans to Evergrande are for residential property projects and the lender is not involved in any hidden liabilities or off-balance sheet financing of the developer.

©2021 Bloomberg L.P.

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