HONG KONG: China Evergrande Group saw its stock claw back as much as 8.3% on Tuesday, after losing 20% a day before, as the property developer moved closer to restructuring a debt pile so big that default could reverberate across borders.
Market participants worldwide are watching to see whether the world's most-indebted property developer, with over $300 billion in liabilities, makes $82.5 million in coupon payments before a 30-day grace period ends later in the global day.
A formal default - China's biggest-ever - would trigger a wave of cross default that would ripple through the property sector and beyond, rattling global investor confidence already shaken by the emergence of the Omicron coronavirus variant.
On Monday, the developer said it had established a risk-management committee that included officials from state entities to assist in "mitigating and eliminating the future risks".
That came after it earlier said creditors had demanded $260 million and that it could not guarantee funds to repay debt. That prompted authorities to summon its chairman and reassure markets that broader risk could be contained.
By midday Tuesday, Evergrande stock - which hit a record low on Monday - had trimmed gains to 0.6%, leaving it at HK$1.82.
Notes due Nov. 6, 2022, - one of two tranches nearing payment deadline - traded at 18.282 cents on the dollar, Duration Finance data showed, little changed from Monday.
Other issuance including a 2024 bond were trading at record lows.
SELL OFF The firm is just one of a number of developers starved of liquidity due to regulatory curbs on borrowing, prompting offshore debt default and credit-rating downgrades, while investors have sold off developers' shares and bonds.
Smaller peer Kaisa Group Holdings Ltd - China's largest offshore debtor among developers after Evergrande - also risks defaulting on a $400 million bond maturing on Tuesday having failed to make a deal with bondholders.
To avoid an overall default, bondholders owning over 50% of 6.5% notes due Dec. 7 sent Kaisa draft terms of forbearance late on Monday to work toward a solution, a person with direct knowledge of the matter old Reuters. Kaisa started discussing forbearance with bondholders last week, the person said.
Another person with direct knowledge said discussions are at preliminary stages and that it will take time to finalise terms.
The people declined to be identified as the information was confidential.
Responding to Reuters' request for comment, Kaisa said it is open to discussion on forbearance, without elaborating.
Sources previously told Reuters that the bondholders, had offered Kaisa $2 billion in funding last month but that no major progress on the offer was made.
Shares of Kaisa - the first Chinese developer to default on an offshore bond in 2015 - rose 3.3% on Tuesday. - Reuters