China Evergrande has been making the headlines globally as concerns over its financial position grow, with tremors being felt across financial markets all over the world. The company is the most indebted property developer in the world and has liabilities/debt of over $300bn that includes about $20bn in outstanding dollar bond debt. With prospects of a default being near certain, a debt restructuring, China’s biggest ever, seems the most likely option.
With updates on Evergrande coming in on a daily basis, it can be hard for investors and advisors to keep track of what is going on with the property developer. To make things easier, we have put together this dashboard that includes the latest updates on Evergrande, timeline of recent events, dollar bond price movements, rating actions, key financials and more – updated daily.
To hear more about what’s going on at Evergrande and the key risks associated with investing in Chinese property developers’ bonds, join us at the upcoming masterclass on High Yield Bond Analysis on Thursday October 7 with Asian High Yield Bond expert Florian Schmidt. Learn more about the session here: https://bondevalue.com/masterclass/
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.
Dollar Bond Price Movements
Timeline of Events
Aug - Dec 2020
- August 28, 2020: Chinese regulators meet with 12 major property developers, including Evergrande to introduce caps for three debt ratios in a pilot scheme, known as “the three red lines”. Evergrande sells 28% of its property management unit for $3bn in a pre-IPO deal.
- September 6, 2020: Company offers 30% discount on properties for a month to push sales. Evergrande raises $555mn via a secondary share-sale in Hong Kong
- September 25, 2020: Concerns on Evergrande emerged in September 2020. At the time, a letter did the rounds on the internet that Evergrande’s was planning to expedite the backdoor listing of its subsidiary Hengda Real Estate on the Shenzhen stock exchange by January 31, 2021. The letter said that if it failed to list by that date, some of Evergrande’s largest strategic investors had the right to demand their money back, as much as CNY 130bn ($19bn), equal to about 92% of its cash balance at the time. Evergrande later noted that the letter was “fake”. But, fears remained that if strategic investors did demand their money back, Evergrande could stare at a liquidity crunch.
- September 30, 2020: Later that month, Evergrande reached an agreement that its strategic investors would not demand repayment. This was only the beginning of events that followed. Ever since, its large creditors, especially banks like China Minsheng Bank started reducing exposure to the company.
Jan - Jun 2021
- January 26, 2021: Evergrande's EV unit China Evergrande New Energy Vehicle raises $3.4bn bringing in six new investors.
March 29, 2021: Evergrande sells 10% of its online real estate and automobile marketplace Fangchebao to 17 investors for $2.10bn in a pre-IPO deal. Evergrande also targets to meet all three red-lines by end-2022, and lays out plan to list Fangchebao by early 2022 and spin off its spring water and tourism units.
- May 31 - June 16, 2021: A report by Caixin’s WeNews said that the regulator CBIRC had launched a probe into the company’s over CNY100bn ($15.7bn) in transactions with Shengjing Bank Co. on whether it was in alignment with business laws. WeNews reported that Evergrande increased its stake indirectly in Shenjing Bank by using proceeds from its bonds, post which the lender bought bonds of the property developer. In June, The regulators asked its creditors to stress test their Evergrande exposure if the developer went into trouble.
- June 20 - 28, 2021: As Evergrande went ahead and paid their maturing $1.47bn 6.25% bonds due June 2021, the company said it would be selling 29.9% of its stake in its smaller unit Calxon worth CNY 2.5bn ($386mn). Separately, Evergrande sold shares in its internet unit HengTen Networks Group for $570mn as per Caixin citing a filing. Sources said these were moves to enhance its cash flows and ease funding pressures.
- June 23, 2021: Fitch downgraded Evergrande to B from B+ citing pressure to downsize its business and reduce total debt.
- June 30, 2021: Evergrande said that it reduced its debt by 15% since March and by 20% since December 2020 to $88bn end-June, and that it met the ‘Net Debt/Equity’ threshold among the three-red lines metrics imposed by China’s regulators.
- July 1, 2021: Following Fitch, Moody’s recently downgraded the company to B2 from B1 citing weakened funding access and reduced liquidity buffer amid a tight credit environment.
- July 6, 2021: A few days later, Evergrande’s bonds fell as much as 10% on a single day, hurting bonds of peers like Kaisa, Fantasia, Risesun, Sunac etc. with high yield bond trading company SC Lowy’s CEO saying that Evergrande’s dollar bonds were not the same buying opportunity they were during the liquidity concerns in September 2020.
Jul - Sep 2021
- July 8, 2021: Bloomberg reported that Evergrande ramped up issuance of commercial bill IOUs and has $32bn in commercial bills outstanding suggesting that it is facing a liquidity crunch as banks and investors have avoided long-term funding to the developer. Besides, China Guangfa Bank was ordered by a court in Jiangsu province to freeze a bank account held by Evergrande's subsidiary Hengda Real Estate Group and its unit. The amount frozen was CNY 132mn ($20mn).
July 21, 2021: Evergrande's project sales see a temporary halt, but the company wires $352mn to repay interest on 4 of its dollar bonds. later scraps a special dividend proposal and S&P cuts its ratings on the company by two notches to B- from B+ with a negative outlook.
- July 22, 2021: A day later, top banks in Hong Kong halt mortgages to buyers of Evergrande's properties and reconsider their decision later that week. Meanwhile, Evergrande scraps a special dividend proposal
- July 30, 2021: Evergrande's bonds plummet after a court froze its entire 20% stake in Shanghai-listed onshore subsidiary Langfang Development Co. for three years
- August 3, 2021: Moody's downgrades the developer to Caa1 by two notches
- August 11 - 27, 2021: Positive News of reports of a unit's stake sale is short-lived and investor sentiment turns dim on possibility of state-support.
- September 1, 2021: Evergrande reports its financial results wherein it warns of 'default risk'
- September 7 - 10, 2021: Evergrande reports that its August property sales fell 26% YoY and later Moody's downgrades the company to Ca from Caa1. Dollar bonds rebound shortly as it gets loan extensions
- September 14 - 17, 2021: Evergrande, its bondholders and the Chinese government hire advisers with the developer warning of cross-defaults in an exchange filing
- September 16, 2021 : S&P downgrades Evergrande to CC and its dollar bonds hit all-time lows of less than 20 cents on the dollar
Upcoming Bond Maturity and Coupon Payments
Rating Action History
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