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1-2 December 2021

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A committee is being formed to ‘press their claims’ by certain holders of a Jumbo Fortune Enterprises dollar bond guaranteed by Evergrande maturing on October 3, 2021 in case a default occurs, as per Bloomberg sources. Jumbo Fortune is a joint venture (JV) with Evergrande’s main subsidiary Hengda Real Estate being one of the owners. The amount maturing is $260mn and is guaranteed by Evergrande and Hengda’s subsidiary, Tianji Holding. Sources said that the guarantees constitute direct, unconditional and unsubordinated obligations and rank pari passu with other unconditional and unsubordinated obligations of the guarantors. The bond is not listed in exchanges and was issued through a private placement. Nonpayment of the bond’s principal would equate to a default as there is no grace period. Five business days are allowed if the nonpayment is due to an administrative and technical error. On the other hand, Evergrande has a coupon of $45.2mn due today on its 9.5% 2024s which have a 30-day grace period before being declared as a default. The 2024s are currently trading at 25.29 cents on the dollar.

Separately, Reuters sources report that China has asked state-backed firms to buy some of Evergrande’s assets with the central government being unlikely to directly intervene with a bailout. As per one source, Guangzhou City Construction Investment Group is near to closing a deal to buy Evergrande’s Guangzhou FC Soccer stadium. Also, Evergrande reported that it has reached an agreement to sell part of its stake in Shengjing Bank for RMB 9.993bn ($1.55bn), representing 19.93% of its stake, as per its HKEX filing today.  Upon completion, Evergrande will still hold 14.57% of the bank with the developer stating that its “liquidity issue has adversely affected Shengjing Bank in a material way. The introduction of the Purchaser, being a state-owned enterprise, will help stabilise the operations of Shengjing Bank”. Today’s HKEX filing did not mention anything about its $83.5mn coupon due on its dollar bonds last week.

Evergrande’s dollar bonds were lower with its 8.25% 2022s down 1.1 points to 26.32.

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