By Gina Lee
Investing.com – China Evergrande Group (HK:3333) has reportedly provided the funds to pay interest on a dollar bond, just in time to meet the deadline and avoid a formal default.
The developer’s Hong Kong shares rose 4.26% to HK$2.69 ($0.35) by 12:17 AM ET (4:17 AM GMT), after jumping as much as 7.8% earlier in the session.
The news, reported by Reuters, corroborated a Securities Times story that stated that China Evergrande remitted $83.5 million in coupon payments to a trustee account at Citibank on Thursday. The remittance means that the company will be able to pay out to all bondholders before the expiry of a 30-day grace period on Oct. 23.
Investors breathed a sigh of relief as the payment averts a default and the ensuing contagion.
"They seem to be avoiding short-term default and it's a bit of a relief that they have managed to find liquidity," a Hong Kong-based restructuring lawyer representing some bondholders told Reuters.
However, China Evergrande still has to make good on coupon payments totaling nearly $280 million on its dollar bonds on Sep. 23, Sep. 29 and Oct. 11.
"China Evergrande does need to restructure its debt. This payment might be a way for them to get some sort of buy-in with stakeholders before the heavy work needed on the restructuring,” said the lawyer.
The next payment deadline is on Oct. 29, as the 30-day grace period on the Sep. 29 coupon expires.
However, to other investors, the news was a positive surprise considering that a default had been widely expected.
“There are many coupon payments due ahead. If China Evergrande pays this time, I don't see why it won't pay the next time," GaoTeng Global Asset Management Ltd portfolio manager James Wong told Reuters.