Evergrande Dollar Bonds Puke As Developer Reportedly Nears Broad Restructuring

Having made a series of last minute payments for specifically non-dollar, domestic bonds, it appears time is finally up for Evergrande’s dollar bond holders as Bloomberg reports that, according to people familiar with the matter, the huge developer is planning to include all its offshore public bonds and private debt obligations in a restructuring that may rank among the nation’s biggest ever.

The property giant had pulled back from the brink of default in October by paying other coupons before the end of its grace period.

However, as we noted earlier in the month, with billions in coupons and maturities due in coming months, the crisis at Asia’s largest junk bond issuer is hardly over, as it grapples with more than $300 billion in liabilities.

Countless other developers have also fallen into distress amid a crackdown on speculation and leverage following years of debt-fueled expansion.  A string of defaults and downgrades in the property industry in recent weeks pushed yields on junk dollar bonds from Chinese issuers to the highest in at least a decade over 24%. The contagion has even spread to other areas of the credit market, including investment grade companies that were previously seen as untouchable by panicked sellers.

And with the latest news from Bloomberg, things may be about to get even more panicked. As Bloomberg reports:

The plan would cover public bonds sold by Evergrande and unit Scenery Journey Ltd., said the people, who asked not to be identified discussing private information. It would also include about $260 million of notes issued by joint venture Jumbo Fortune Enterprises that Evergrande has guaranteed, one of the people said. The formal restructuring process has yet to begin and details of the plan could change.

Evergrande has been reviewing its capital structure and has engaged in “ongoing dialogue with offshore creditors” since September, according to its filing on Friday.

And that has sparked more selling into the brief relief rally that dollar bonds have seen for the last month…

Grace periods for interest payments on two notes from Evergrande’s Scenery Journey unit end Monday – a $41.9 million coupon for a note maturing in 2022 and $40.6 million of interest on a security due the following year – and could mark the developer’s first default on public debts. Evergrande indicated in its filing Friday that it may not be able to fulfill its pledge to guarantee payment on the notes issued by Jumbo Fortune. The developer didn’t immediately respond to a request for comment on its restructuring plan Monday.

A barrage of statements from Chinese regulators, several of which landed just minutes after Evergrande’s announcement on Friday, suggested authorities are striving to contain the fallout on homeowners, the financial system and the broader economy rather than orchestrate a bailout.

And, as a reminder, another developer – Kaisa – is on course for default this week unless it can reach a last-minute agreement with creditors to delay payment. The firm has $11.6 billion in outstanding dollar debt, making it the nation’s third-largest issuer of such notes among property firms.