China Evergrande Group’s shares 3333, -12.44% fell Monday, following the property developer’s warning of possible cross-defaults on its dollar bonds after it was asked to repay a US$260 million debt obligation.
“In light of the current liquidity status of the group, there is no guarantee that the Group will have sufficient funds to continue to perform its financial obligations,” Evergrande said in a statement late Friday.
The 30-day grace period for US$82 million of coupon payments on onshore and offshore bonds that were due Nov. 6 is also expiring, according to debt-research company CreditSights.
The Hong Kong-listed developer had requested help from the Chinese government, with the Guangdong provincial government sending a working team to help the company manage its risks.
The stock fell as much as 14% to HK$1.94, its lowest level since May 2010. Shares were last down 12% at HK$1.97 by the midday break.
CCB International Securities said a possible default “is not anything surprising,” adding that it expects relatively limited contagion risks because of the currently loosening credit environment. “Most developers remain stable,” it said.
It added that companies like Sunac China Holdings Ltd. 1918, -1.04%, Shimao Group Holdings Ltd. 813, -0.67%, Agile Group Holdings Ltd. 3383, -0.20% and KWG Group Holdings Ltd. 1813, could benefit, as the sector’s “darkest moment” passes amid easing credit conditions.
The Chinese government “appears highly unlikely to bail out Evergrande,” U.S. bank Jefferies said. “Evergrande’s restructuring is a foregone conclusion, which is largely expected given current bond yield.”
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