Evergrande, the teetering Chinese real estate developer, has three more payments due Monday on its dollar bonds. It’s been about two weeks since the company, which has $300 billion in liabilities, missed a Sept. 23 bond payment, starting the clock on the 30-day grace period before it formally defaults.
Cracks are beginning to appear across China’s real estate industry, as the government weighs bailouts of over-indebted developers against a push to curb speculation. Developers have amassed more than $5 trillion in debt, and buyers are wary of high prices, denting sales and forcing sellers to cut prices. Evergrande isn’t the only developer struggling with its debts, including those owed to international creditors; collectively, Chinese real estate companies have more than $28 billion in dollar bond payments due in 2022.
Evergrande’s offshore creditors are beginning to make noise, amid fears that China will prioritize onshore creditors in any potential restructuring. Last week, Moelis and Kirkland & Ellis, the advisers representing a number of offshore bondholders, said they were concerned about a lack of information from China, including details about Evergrande’s potential sale of a stake in one of its divisions. (Trading in the company’s shares has been halted since Oct. 4.)
Creditors also questioned whether a deal announced by Evergrande last month to sell a $1.5 billion stake in a bank to help settle debts amounted to preferential treatment that kept offshore creditors out of the loop. Creditors are looking for recourse in Cayman law, which governs Evergrande’s offshore bonds. On Saturday, Evergrande said it had punished six executives who redeemed company investment products early, forcing them to return the funds.
