Evergrande latest: Bond coupon outstanding, BoE confident of resolution

The Bank of England says its base case position on the China Evergrande saga is that it “won’t go badly wrong”.

The remarks were made by the Bank of England’s Deputy Governor Sam Woods in an interview with Reuters.

“I am very cautiously optimistic the Chinese authorities will want to find a way through it that doesn’t create a kind of major issue,” Woods said.

“My base case is it won’t go badly wrong.”

Meanwhile, there remains no update on a $83.5 million coupon payment due by the end of today (September 23, US EST) on the EVERRE 8.25% March 2022 USD bond. The 5-year bond’s initial issue size was around $2 billion.

There is a covenant attached to the bond that states the company has 30 days after the coupon due date to arrange payment or re-negotiate, before a default is triggered.

London-headquartered Ashmore Group was the biggest single holder of the bond as of fillings on June 30, 2021.

Evergrande latest
Source: asiaMARKETS.com

Evergrande did tell the market it “resolved” a $36 million coupon payment that was also due today for an yuan-denominated bond (the Shenzhen-traded 5.8% September 2025 bond).

But that resolution is a drop in the ocean.

It has a further $47.5 million dollar coupon payment due next week for its March 2024 USD bond and there’s many more payment dealines to come.

As it currently stands, Evergrande has some $670 million total in coupon payments due through the remainder of this calendar year.

A Government-led restructure?

Asia Markets yesterday published quotes obtained during a conversation with a mainland China-based executive of a state-owned enterprise, who stated a Government-led Evergrande restructure is imminent. The executive spoke on the condition of anonymity.

The source revealed he was privy to a deal being planed by CCP officials to see Evergrande split into three seperate entities, backed by state-owned enterprises. He believed that plan could be approved in the near future.

One of the world’s most prominent short-sellers, Andrew Left of Citron Research, has said he believes a Government-led restrucutre is the most likely outcome.

“I think (Evergrande’s) equity will be wiped out, the debt looks like it is in trouble and the Chinese government is going to break up this company,” said Left.

“But I don’t think that this is going to be the straw that breaks the global economy’s back.”

Almost a decade ago Mr Left published a report accusing Evergrande of defrauding investors and being insolvent.