A source close to the Chinese Government has told Asia Markets a deal that will see China Evergrande restructured into three seperate entities is currently being finalised by the Chinese Communist Party and could be announced within days.
The source said China will soon begin asking state-owned enterprises to underpin the restructure, effectively transforming the property developer into a state-owned enterprise.
“The deal is being designed to protect Chinese nationals who have bought apartments from Evergrande, like the ones you see protesting on the streets and also those who have invested in Evergrande’s wealth management products,” the source said.
“But the big thing is stemming any widespread economic flow-on effects that insolvency would cause on the China economy.”
Talk of a Government-led restructure comes as the Thursday (September 23) deadline looms for a $83.5 million interest payment on a 5-year, USD denominated Evergrande bond. The bond’s initial issue size was around $2 billion.
The bond’s covenants have a 30-day period before a missed payment is considered a default.
On the same day, Evergrande also has to pay a $35.8 million coupon payment for a Shenzhen-traded 5.8% Sept 2025 bond. The company’s Hengda Real Estate unit has today said it will make that payment, but not word thus far on the USD bond commitments.
Another multi-million dollar interest payment on a 7-year USD bond is due the following week.
Those exposed to Evergrande’s USD bonds and Evergrande shareholders are likely to be hardest hit by the China Evergrande deal.
Who are Evergrande’s bond holders?
Here are the biggest holders of Evergrande three largest USD bonds.