Evergrande Stocks Hit New Low as it Edges Closer to Default

On Wednesday, shares of the embattled China Evergrande Group slipped again after a missed debt payment deadline, edging closer to a default.

The cash-strapped property developer shed 1.64% to $0.23 per share, reversing its Tuesday gain of 1.10%. 

Accordingly, Evergrande failed to make $82.50 million in interest payments on some US dollar bonds at the end of a month-long grace period. 

This conflict would prompt a cross-default on its $19.00 billion of international bonds, flagging a ripple effect on the economy and the broader market.

Evergrande Group once belonged to China’s leading property developers as it held more than 1,300 real estate projects.

However, the business slumped as it struggled to comply with its $300.00 billion liabilities.

At present, the highly indebted firm is now at the heart of a property predicament in China.

In addition to the liquidity crisis, smaller peer Kaisa Group Holdings grappled to make repayments recently. 

Correspondingly, it halted trading in Hong Kong again, following reports that it likely missed the $400-million offshore debt deadline on Tuesday. 

Subsequently, its shares have plummeted 20.00% over the past month as it snowed under debt issues.

Last month, the firm mentioned restructuring offshore debt payments due in December. 

Kaisa explained that it would offer investors new bonds worth $380.00 million due in 2023. In the stated case, its original US dollar-denominated bonds will be at $400.00 million.

However, analysts noted that it missed an exchange offer with bondholders, increasing the chances of default. 

In the agreement, bondholders could choose to buy new bonds issued by the developer as an exchange with equity in the listed units. 

Kaisa is the second-largest issuer of US dollar-denominated offshore high-yield bonds after the Evergrande Group. 

Evergrande Set for Restructuring

Meanwhile, Evergrande announced its plans on Tuesday to forge ahead with restructuring its overseas public bonds and private debt.

At the same time, it said that it would set up a risk management committee to mitigate and eliminate future risks for the firm.

This is a significant move for the world’s most indebted property developer, who has been struggling to raise funds.

In addition, the Chinese government reassured the market that Evergrande’s problems are appropriately contained. 

Moreover, the People’s Bank of China also boosted the liquidity in the country’s financial sector. This emphasis on monetary easing has buoyed the risk-on sentiment of global investors. 

Last week, the provincial government of Guangdong also stepped in averting the fallout. 

Meanwhile, China Evergrande has not communicated to bondholders about the failed payment.