Evergrande finds funds to avoid default for now

China Evergrande Group appeared to avoid a default with a last-minute payment of interest on a bond, a source told Reuters, gaining another week to deal with a debt crisis that threatens the world’s second-largest economy.

China’s second-largest real estate developer remitted $ 83.5 million to a trust account at Citibank on Thursday, the person with knowledge of the situation told Reuters, allowing it to pay interest on a dollar bond before the end of the grace period. October 23.

This brought relief to investors and regulators concerned about the repercussions on world markets, and will add to the guarantees offered by the Chinese authorities, who have said that creditors will be protected.

Still, the world’s most indebted real estate firm – with more than $ 300 billion in debt – will have to make payments on a number of other bonds. The next important deadline to avoid a default is October 29 and not much is known about your ability to pay.

Evergrande did not respond to a request for comment. Citibank declined to comment. The source was not authorized to speak to the media and declined to be identified.

Evergrande’s problems have been mounting for months and its dwindling resources in the face of its huge liabilities have wiped out 80% of its value.

Founded in Guangzhou in 1996, the developer epitomized an era of freedom of action to borrow and build. However, that business model has been complicated by hundreds of new rules designed to curb the building frenzy and promote affordable housing.

Friday’s payment news means Evergrande will pay the next offshore coupon, the analyst said. Travis Lundy from Quiddity Advisors in Hong Kong.

“It doesn’t make sense to pay this one if you plan on not paying the next six days later, but given the company’s self-reported cash flow difficulties, it’s unclear how long they’ll be able to keep it up.“, he pointed.

“A relief”

It was not clear how EvergrandeWith liquidity problems, he was able to raise funds to pay the bondholders or if one of them had already received the money. Evergrande it now needs to find $ 47.5 million by October 29 and must face about $ 338 million in overseas coupon payments in November and December.

Failure to pay in the next week, or any other deadline in the coming weeks, would trigger defaults on his $ 19 billion in bonds in the international capital markets.

That would make it the second largest default in emerging corporate markets after Venezuelan state oil company Petróleos de Venezuela (PDVSA).

The news comes a day after financial information provider REDD said Evergrande had bought more time to pay off an unpaid bond it guaranteed, issued by Jumbo Fortune Enterprises.

“They appear to be avoiding short-term default and it is a relief that they have managed to find liquidity.”Said a Hong Kong-based debt restructuring attorney representing some bondholders.

“This payment could be a way to get some kind of buy-in from stakeholders before the hard work required in restructuring.”Added the lawyer, who asked to remain anonymous.

Evergrande It did not pay coupons for a total of almost US $ 280 million in its bonds in dollars on September 23, September 29 and October 11, initiating grace periods of 30 days for each.