The Evergrande Saga – News, Timelines & Charts

10 December, 2021

• Fitch downgraded both Evergrande and Kaisa to RD from C following the developers’ missed coupon payments. It downgraded Evergrande’s subsidiaries Hengda and Tianji to RD too. Fitch notes that Evergrande’s downgrade reflected the non-payment of coupons on November 6, 2021 for Tianji’s 13% 2022s and 13.75% 2023s after the grace period lapsed on December 6, 2021. There has been no announcement by Evergrande regarding the coupons and the non-payment has triggered cross-defaults on Evergrande’s bonds. Additionally, there has been uncertainty regarding its restructuring plan adding to the risks. Fitch affirmed the senior unsecured ratings of Evergrande and its subsidiaries’ bonds at C, with a recovery rating of RR6. IFR notes that historically, RR6 securities only recover 0%–10% of their principal and related interest following a default, based on Fitch’s rating definition. Bloomberg notes that the technical default of Evergrande will also be the largest ever by an Asian issuer.

8 December, 2021

• China Evergrande missed the 30-day grace period deadline to pay coupons worth $41.9mn and $40.6mn on its 13% 2022s and 13.75% 2023s respectively. Media agencies state some bondholders said that they did not receive the coupons on the bonds. Rating agency S&P’s analysts noted that default looked inevitable for Evergrande. Besides, Evergrande also received a demand related to guarantees on $260mn of debt last week. FT notes that the above combined amounts which total $343mn was the equivalent amount of shares that Chairman Hui Ka Yan sold in late November. However, Evergrande has not said if Hui Ka Yan would use the proceeds to help pay down debts.

• Evergrande in an HKEX filing mentioned that its board had resolved to establish a Risk Management Committee comprising senior management of Evergrande, senior management of leading enterprises and select professionals that include the VP of China Cinda AMC, Chief Capital Officer of Guangzhou Yuexiu Holdings, a Partner of Beijing Zhonglun Law Firm, the Deputy General Manager of Guangdong Holdings and the Compliance Director of Guosen Securities besides Evergrande’s Chairman Hui Ka Yan and CFO Pan Darong. Evergrande noted that while the committee is not a board committee, it will play a key role in mitigating and eliminating future risks of the developer. Evergrande’s dollar bonds fell over 1 point on Tuesday to trade at 17-19 cents on the dollar, and have slightly recovered today to trade at 18-20 cents on the dollar.

6 December, 2021

• China Evergrande in an exchange filing mentioned “there is no guarantee that the Group will have sufficient funds to continue to perform on its financial obligations” given its liquidity status. Evergrande noted that it plans to actively engage with offshore creditors to formulate a viable restructuring plan. This comes after Evergrande received a demand to perform its obligations under a guarantee for ~$260mn. Immediately after the announcement, Bloomberg says that Chinese regulators suggested that authorities were ‘striving to contain the fallout on homeowners, the financial system and the broader economy rather than orchestrate a bailout’. The government of Guangdong summoned Evergrande founder Hui Ka Yan saying that it would send a working group to the developer to oversee risk management, strengthen internal controls and maintain normal operations. Bloomberg adds that the major focus is on whether Beijing can coordinate a restructuring without upending the broader real estate sector. Restructuring talks have been awaited since September when its dollar bonds plunged to below 30 cents on the dollar.

29 November, 2021

• Evergrande’s founder Hui Ka Yan sold 1.2bn shares in the company at an average price of HK$2.23/share last Thursday, almost a 20% discount to the share price on Wednesday. The total value of the stake sale amounted to HK$2.68bn ($344mn), lowering his overall stake to 67.9% from 77%.

• Separately, China Evergrande New Energy Vehicle Group returned many undeveloped plots of land to the Chinese government for RMB 1.28bn ($200mn), as per SCMP. The sale of 2.7mn sq. metres of land is an effort to alleviate its cash crunch and keep operations afloat. The net proceeds, after some confiscations by the government, will be used to fund construction projects, pay wages to migrant workers, and pay for any unreturned land parcels.

18 November, 2021

• Further details of China Evergrande’s asset sales have emerged. Evergrande said that its unit will sell its entire stake in HengTen Network Holdings for HKD 2.1bn ($270mn) after entering into an agreement with Allied Resources Investment Holdings. HengTen’s stake will be sold at HKD 1.28/share, a 24% discount to its closing price on November 17.

• Chinese media outlet Cailianshe cites sources reporting that Evergrande has dissolved several district-level units of Fangchebao (FCB) due to shrinking capital and business, as per Reuters. No other details were available on this transaction. FCB is Evergrande’s online real estate and automobile marketplace. In March 2021, Evergrande sold 10% of FCB to 17 investors for $2.10bn and later hoped to spin-off FCB and its bottled water unit to raise funds. FCB had planned for an IPO in late 2021 or early 2022.
• Evergrande’s founder Hui Ka Yan has stepped up the disposal of his corporate and personal assets as per SCMP. These include Dutch electric motor maker e-Traction, sold last week to Saietta Group for €2mn ($2.3mn), a massive 97% discount to its March 2019 purchase price of RMB 500mn ($78.4mn). Evergrande’s dollar bonds continue to trade at distressed levels of 20-24 cents on the dollar.

17 November, 2021

• Distressed Chinese real estate developer China Evergrande has reportedly received a cash infusion of RMB 7bn ($1.1bn) from billionaire Chairman Hui Ka Yan. As per China Business News, sources said that Hui raised the funds by selling off his personal assets and share pledges. Bloomberg Intelligence’s Daniel Fan added that Hui’s associate has pledged two houses on the prestigious Peak in Hong Kong as collateral for an HKD 821mn ($105mn) loan that could help the company meet its overdue payments.

11 November, 2021

• China Evergrande is said to have paid $148mn in coupons just before the 30-day grace period ended on its dollar bonds after it skipped the payment last month. The bonds in question are Evergrande‘s 9.5% 2022s and 10% 2023s. Bloomberg cited a spokesperson for Clearstream stating that bondholders of two of the bonds said they received payments. Details of exactly what time the grace period expired on Wednesday was unclear, but two sources told Reuters that some bondholders had not been paid by the end of the Asian business day. Evergrande has not commented on the matter yet.

9 November, 2021

• Evergrande did not pay coupons due on two of its dollar bonds on Saturday, 06 November. The property developer skipped coupons on its 13% 2022s and 13.75% 2023s, kicking-off a 30-day grace period to make the payments before being considered a default. The non-payment is not new for Evergrande since the company has skipped coupons since September, but has paid them before the 30-day deadline twice – $83.5mn coupon on its 8.25% 2022s on October 22 and a $47.5mn coupon on its 9.5% 2024s on October 29. The next 30-day deadline ends on November 11, for over $148mn in coupon payments that was had been due on Oct. 11. Evergrande’s 13% 2022s and 13.75% 2023s were trading lower by 0.3-0.4 points to 22.35 and 22.28 respectively.

29 October, 2021

• Evergrande has paid the coupon due on September 29 on its dollar bond ahead of the 30-day grace period deadline, as per sources. Evergrande had to make a $47.5mn coupon payment on its 9.5% 2024s to bondholders by today (October 29) before it could trigger cross-defaults. The property developer has now averted a default twice after paying $83.5mn in coupons on its dollar bonds just a week earlier. Evergrande still has nearly $338mn in dollar bond coupon payments due in November and December. Evergrande’s dollar bonds were higher with its 8.25% 2022s up 1.5 points to 30 cents on the dollar.

27 October, 2021

• Beijing has urged Evergrande’s billionaire chairman Hui Ka Yan to use his personal wealth to allay Evergrande’s deepening debt crisis, as per sources. The push from Beijing came after Evergrande missed its dollar bond coupon on September 23. Hui Ka Yan’s net worth has tumbled to ~$7.8bn from $42bn at its peak in 2017, when he was among the top richest men in Asia. Much of his net worth has been derived from his controlling stake in Evergrande whose shares have collapsed from HKD 30/share in 2017 to HKD 2.6/share currently. Bloomberg notes that it is unclear whether the chairman’s fortune is big and liquid enough to make a sizeable contribution to Evergrande’s liabilities that top $300bn. Evergrande has over $7.4bn in onshore and offshore bonds due in 2022. The sources also said that local governments are monitoring Evergrande’s bank accounts to ensure company cash is used to complete unfinished housing projects and not being used to pay creditors. Evergrande’s dollar bonds were stable with its 8.75% 2025s at 22.5 cents on the dollar.

22 October, 2021

• Evergrande is said to have wired the $83.5mn coupon payment on its 8.25% 2022s that it missed last month, state-backed newspaper Securities Times said, citing local media. Evergrande had missed a September 23 deadline for the coupon payment post which a 30-day grace period ending October 23 kicked-in. Evergrande had not made any announcement regarding the bond, keeping investors on the edge.
• Separately, Evergrande has gotten an extension of over three months regarding the redemption of its $260mn Jumbo Fortune Bond for which it is a guarantor, as per Reuters citing financial provider REDD. A source said that Evergrande’s Chairman Hui Ka Yan agreed to pump personal wealth into a Chinese residential project tied to the bond to ensure it gets completed, ‘paving the way for bondholders to get their dues’.

20 October, 2021

• China Evergrande scrapped talks to sell 50.1% of its stake worth $2.6bn in Evergrande Property Services to a unit of Hopson Development as per its exchange filing. Evergrande said that it “had reason to believe the purchaser had not met the prerequisite to make a general offer for the shares”. It added that it had made no material progress on asset sales and that there is no guarantee that it will be able to meet its financial obligations. Earlier this month, sources reported Hopson’s interest in buying the stake in Evergrande’s property services unit. Bloomberg reports that Evergrande said its contracted property sales for September through October 20 totaled RMB 3.65bn ($571mn), a fraction of the RMB 142bn ($22.2bn) it recorded from September to October 8 last year.

  Evergrande’s dollar bonds were slightly lower with its 13% 2022s down 0.5 to 17.5 cents on the dollar.

18 October, 2021

• China’s state-owned developer Yuexiu Property has pulled out of a $1.7bn deal to buy Evergrande’s Hong Kong headquarters due to concerns over the latter’s dire financial situation as per Reuters sources. The sources said that Yuexiu was close to sealing the deal in August but Yuexiu’s board opposed the move over worries that Evergrande’s ‘unresolved indebtedness would create potential complications in completing the transaction smoothly’. The move adds to the negative news flow for Evergrande, which skipped its dollar bonds’ coupon payment last month, the first of which is due at the end of the week after the 30-day grace period.

• Separately, Hong Kong’s audit regulator, the Financial Reporting Council (FRC) issued a press release on October 15, 2021 stating that it was investigating Evergrande’s accounts for the full year of 2020 and 1H2021. They will also investigate the audit carried out by PwC on Evergrande’s 2020 annual accounts since it made no reference to its ‘going concern’ material uncertainties.

  The FRC added that Evergrande as of end 2020, reported cash and cash equivalents of RMB 159bn ($24.7bn) which did not cover its current liabilities of RMB 1,507bn ($234bn) and that it had further borrowings of RMB 167bn ($26bn) maturing in 2022. In the 2021 interim accounts, Evergrande revealed that it was having contract negotiations with suppliers and construction workers for “which work was suspended due to overdue property development accounts payable”. In addition, Evergrande again made no explicit statement in the 2021 interim accounts that material going concern uncertainties existed or whether its directors judged it was appropriate to “adopt the going concern basis and, if so, whether that judgement was significant”.

  Evergrande’s dollar bonds continue to trade at distressed levels with its 8.75% 2025s at 20.2.

15 October, 2021

• Evergrande missed a $28mn equivalent payment for land that it acquired in the northeastern city of Changchun as per municipal authorities. The land was purchased through local developer Changchun Jitao Real Estate Development Co for RMB 601mn ($93mn) in an auction on June 17.

12 October, 2021

• Evergrande missed payment of coupons due on October 11 on two of its dollar bonds – the 9.5% 2022s and 10% 2023s as of 5pm HKT, as per Bloomberg. Similar to its missed coupons in September, the above bonds have a 30-day grace period before being considered as a default. The 9.5% 2022s and 10% 2023s trade at 21.75 and 20.81 cents on the dollar respectively.

• Separately, Evergrande’s unit, China Evergrande New Energy Vehicle’s President Liu Yongzhuo pledged that the unit would deliver its first EV next year. This comes just weeks after admitting to cash-flow difficulties where it said that there was no guarantee it could meet financial obligations whilst simultaneously looking for strategic investors to inject capital. Bloomberg references the statement, saying “the local district’s top official said the region would provide help from funding to approvals and coordinating with financial institutions, to ensure the company can achieve mass-production goals early.”

4 October, 2021

• Hopson Development plans to acquire a 51% stake in Evergrande Property Services for over HKD 40bn ($5.1bn) as per sources cited by Cailian news. Evergrande’s Property Services unit has a market cap of HKD 55bn ($7bn). As of end-June 2021, the unit had cash balances (including restricted cash) of RMB 14bn ($2.18bn), short-term liabilities of RMB 9.9bn ($1.5bn) and long-term liabilities of RMB 870mn ($135mn). For 1H2021, the unit reported gross profits of RMB 2.9bn ($450mn), up 68.7% YoY and net profits of RMB 1.9bn ($290mn), a 68.6% YoY increase. Hopson is rated B2/B+ (Moody’s/Fitch).

1 October, 2021

• China Evergrande said that it made a 10% repayment on its wealth management products (WMPs) due September 30, as per Reuters. However, the company did not reveal the amount that was repaid and remained silent on its offshore dollar bond coupons that were due on September 23 and 29. “I can’t see there being much willingness to give a fairer outcome to offshore bondholders rather than onshore banks, let alone house buyers and people who have lent onshore through the personal loan structures,” said Alexander Aitken, a partner at Herbert Smith Freehills. Legally also, offshore bondholders are structurally subordinated where creditors to its onshore subsidiaries get paid before lenders to the parent or any its offshore debt issuers.

30 September, 2021

• Evergrande and its subsidiaries Hengda and Tianji were downgraded to C from CC by Fitch given that Evergrande is likely to have missed the coupon payment on its 8.25% 2022s on September 23. Fitch highlighted that not only did the developer or a trustee not make an announcement, but Fitch has also not obtained any confirmation. Fitch meanwhile made a recovery analysis of the company assuming it would be liquidated during bankruptcy, highlights of which are given below:

  • A 10% administrative claim
  • 60% advance rate on net inventory reflecting likely steep discounts needed to sell large land banks
  • 70% advance rate on trade receivables from the sale of properties; 87% of trade receivables are due within 90 days
  • 60% advance rate on Property, Plant & Equipment comprising buildings and ongoing construction
  • 10% advance rate to investment properties based on a conservative 6.5% cap rate on annualized rental income
  • 100% advance rate applied to available cash, after adding trade payables to the liability waterfall

  Fitch excluded RMB 88bn ($13.6bn) of JV investments as they may not be easily liquidated. Evergrande’s liquidation value was taken after de-consolidating Hengda, China Evergrande NEV (Evergrande Auto) and Evergrande Property Services Group. Fitch gave a recovery rating of RR6 for Evergrande and its subsidiaries’ senior bonds reflecting, a recovery of 0–10% of current principal and related interest given default.

• Separately, more details were revealed regarding yesterday’s news where Reuters sources’ reported that China asked state-backed firms to buy some of Evergrande’s assets. China Vanke, China Jinmao and China Resources Land are among the government-backed property developers that have been asked to purchase assets from Evergrande, the report said. Regarding SOE’s buying the assets, Lucror Analytics said, “This may help alleviate Evergrande’s short term liquidity and go some ways to restoring market confidence in the sector”.

29 September, 2021

• A committee is being formed to ‘press their claims’ by certain holders of a Jumbo Fortune Enterprises dollar bond guaranteed by Evergrande maturing next week 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 size of the bond 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 on exchanges and was issued through a private placement (Term of the Day, explained below). 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.

28 September, 2021

• Two local governments have taken control of presale revenues from Evergrande’s properties so that “homebuyers’ interest can be protected and project construction continued”, as per a circular seen by the FT. The local governments in question are the Nansha District housing and urban-rural construction bureau in the southern city of Guangzhou and district housing bureau in Zhuhai, a neighboring city to Macau. Bo Zhuang, a Singapore-based economist at Loomis Sayles said, “It is common for Chinese developers to allocate sales proceeds earmarked for particular projects for other uses, ranging from debt payments to land purchases…That is no longer an option”. With project completion being a major focus by regulators, putting presale proceeds under their watch can ensure that project funding is kept tied and not misused.

27 September, 2021

• Evergrande’s electric vehicle (EV) unit Evergrande New Energy Vehicle Group (NEV) will not go ahead with its domestic Shanghai IPO plan as per its filing with the Hong Kong stock exchange where it is already listed. Due to delays in supplier payments and construction fees, work on two of its projects were suspended with no progress on its resumption. The filing said that the group was facing a “serious shortage of funds” and “suspended paying some of its operating expenses and some suppliers have suspended supplying for projects”. However, they said that they were still exploring with different potential strategic investors to introduce new investors to the Group. ET notes that Evergrande NEV is a relatively small part of Evergrande and makes most of its money from its community health services business and nursing home facilities. It reported a net loss of RMB 4.8bn ($742mn) in 1H2021 of which RMB 6.89bn ($1.1bn) is attributable to the group’s health and aged-care business.

24 September, 2021

• Beijing regulators have issued instructions to Evergrande telling the developer to focus on completing unfinished properties, repaying individual investors and avoiding a near-term default on dollar bonds as per Bloomberg sources. They are said to have told Evergrande to proactively communicate with bondholders to avoid a default but did not give specific guidance. Bloomberg adds that there was no indication of the regulators offering financial support for the bond payment, and that it was unclear whether officials believed Evergrande should eventually impose losses on offshore creditors. The source said that the regulators were trying to know more on the holders of Evergrande’s bonds.
• Evergrande did not provide any update on its coupon payment of $83.5mn due on its dollar 8.25% 2022s yesterday. The notes have a 30-day grace period for the payment to be made before being considered a default. The next offshore bond payment for the developer is $47.5mn in coupons due on September 29.
• Separately, WSJ noted sources reporting that China had asked local governments to get “ready for a possible storm” and prepare for a downfall of the property developer. The sources said that local government agencies and SOEs were asked to step-in only at the last minute if Evergrande fails to manage its issues in an orderly manner.

22 September, 2021

• Evergrande missed interest payments due on loans to two of its largest bank creditors on Tuesday, 22 September 2021. The news was not unexpected as China’s Ministry of Housing and Urban-Rural Development convened a meeting with banks last week and informed them that Evergrande will not be able to meet its obligations.
• Separately, Evergrande’s main unit Hengda Real Estate said on Wednesday, 22 September 2021 that it has agreed to make a bond coupon payment on its onshore Shenzhen-traded 5.8% September 2025s on 23 September 2021. Details on how much it would pay were not mentioned as per Bloomberg. The amount due on the onshore bond is RMB 232mn ($35.9mn). “Evergrande might have arrived at some kind of standstill with onshore holders. They might have asked them not to act, pending for negotiation for a rescheduling or something of that sort”, said Daniel Fan, a credit analyst at Bloomberg Intelligence.  The focus now turns towards Evergrande’s $83.5mn coupon on its USD 8.25% 2022s due tomorrow, that currently trade at 25.53 cents on the dollar.