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Reports: Evergrande Group Arranges Bond Extension

Oct 21, 2021

Reuters, REDD say company's billionaire chairman has agreed to provide additional collateral to ensure a construction project tied to a $260M bond is completed.

  • The extension came just a day after Evergrande said Wednesday that a deal to sell a 50.1% stake in Evergrande Property Services Group Ltd to Hopson Development Holdings Ltd. had collapsed.

China Evergrande Group appears to have at least temporarily delayed financial disaster thanks to the deep pockets of its chairman, according to multiple reports.

According to reports by REDD Intelligence and the Reuters news service, the Chinese property developer has secured an extension on a defaulted bond, just a day after a deal to sell a $2.6 billion stake in its property services unit collapsed.

REDD reported that Evergrande has arranged for a three-month extension for the date of maturity on a $260 million bond issued by Jumbo Fortune Enterprises that Evergrande had guaranteed. The extension was granted after Evergrande's chairman agreed to provide additional collateral,

Reuters news service, citing a source familiar with the deal, reported that Chairman Hui Ka Yan agreed to use his personal wealth to support a Chinese residential project tied to the bond, to ensure the project is completed and that bondholders would receive their dues. Forbes has previously estimated that Hui Ka Yan is worth more than $11 billion.

Bondholders agreed to the proposal to avoid a collapse of Evergrande or a drawn-out legal battle, the source told Reuters.

The extension came just a day after Evergrande said Wednesday that a deal to sell a 50.1% stake in Evergrande Property Services Group Ltd to Hopson Development Holdings Ltd. had collapsed. Evergrande said Hopson, a smaller competitor, had failed to meet the "prerequisite to make a general offer,” according to Reuters.

Hopson, however, said it is still exploring its options. The company, Reuters reported, said all major banks were positive toward the investment, and that a third-party financial adviser had verified the company had the  resources needed to acquire the 50.1% stake.

That deal is the second to fall through as Evergrande has sought to raise capital over the past several weeks.

Reuters said two sources told it last week that the $1.7 billion sale of Evergrande’s Hong Kong headquarters had failed amid buyer concerns over the developer's worsening financial situation.

The collapse of the Hopson deal also comes just ahead of the end of a 30-day grace period for Evergrande to make good on $83.5 million in coupon payments for an offshore bond. If it fails to pay, China’s largest developer would be considered in default.

Reuters reported that in an exchange filing on Wednesday, the company said the grace periods for paying interest on its U.S. dollar-denominated bonds that had become due in September and October had not expired. It did not elaborate, the news agency said.

As NMP reported in September, Evergrande Group is one of the largest property developers in China, and carries the biggest debt burden of any publicly traded real estate management or development company in the world at $300 billion.

The threat of major losses among its bondholders and lenders is expected to have a domino effect in China’s real estate market, similar to the Lehman Brothers’ collapse in the U.S. in 2008.

If Evergrande slidies into default, it could trigger a technical default among its creditors, estimated at 130 financial institutions worldwide.

About the author
David Krechevsky was an editor at NMP.
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