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China Evergrande Bond Payment Remains Uncertain

  • September 24, 2021

China Evergrande, the property giant whose financial troubles roiled global markets earlier this week, left investors in a state of uncertainty again on Thursday with the fate of an $83 million interest payment still unresolved.

The payment, on Evergrande’s dollar-denominated bonds, was due Thursday. By the end of the business day in New York, the company had still not said publicly whether it had made the payment or planned to.

One bondholder, speaking on condition of anonymity to discuss the matter, said they had not been paid. But, this person noted, the company’s debt covenants provide it with a 30-day grace period before the missed payment results in a default, which means the limbo debtholders find themselves in could continue.

The concern extends to property owners and policymakers in China who would face the fallout of a possible default. A steady flow of negative news from Evergrande has prompted panic in markets and raised fears of the possible economic contagion — including outside China — should the company collapse. Unable to sell off parts of its corporate sprawl or raise fresh cash through the sale of new properties, Evergrande is also facing angry suppliers, home buyers and employees, some of whom have protested and demanded their money.

The tension in global financial markets has eased more recently, in part as Chinese officials stepped in to shore up confidence — including by pumping billions of dollars of capital into the country’s banking system — and also after several bank executives and central bank officials outside China said the impact on institutions in the United States and Europe should be minimal.

On another key question for investors, whether China will directly bail Evergrande out, so far Beijing has remained tight-lipped while emphasizing that no Chinese company is too big to fail.

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