China Evergrande Group’s stock climbed more than 5% on Thursday, as prospects of a managed debt restructuring assuaged worries of a messy corporate collapse following the developer’s failure to meet a debt payment deadline earlier this week.
Evergrande’s stock jumped as much as 5% to HK$1.82 after hitting a record closing low on Wednesday. Evergrande’s failure to pay $82.5 million in interest due last month would result in a cross-default on the developer’s roughly $19 billion in international bonds, putting the developer at risk of becoming China’s biggest defaulter. This possibility has loomed over the world’s second-largest economy for months.
Evergrande failed as they do not make payments on some US dollar bonds at the end of a month-long grace period, laying the groundwork for a major default by the world’s most indebted property developer.
Evergrande was previously China’s largest property developer, with over 1,300 projects under construction. However, it is currently at the center of a property crisis in China this year, which has crushed almost a dozen smaller enterprises with $300 billion in liabilities.
It said creditors had sought $260 million. However, it couldn’t guarantee finances to cover debts, forcing regulators to summon the company’s chairman and reassure investors that the broader risk could be addressed.
Evergrande’s liquidity remained very fragile as a result of the $260 million repayment demand, with a default becoming increasingly likely given maturities totaling $3.5 billion in March and April 2022.
The company is one of a number of developers that have been deprived of liquidity as a result of legislative restrictions on borrowing, which has resulted in offshore debt default and credit-rating downgrades, as well as investor sell-offs of developer shares and bonds.
After failing to reach an agreement with bondholders, smaller peer Kaisa Group Holdings Ltd – China’s second-largest offshore debtor among developers after Evergrande – faces default on a $400 million bond due on Tuesday.
On Tuesday, shares of Kaisa gained 3.3 percent after the company became the first Chinese developer to default on an offshore bond in 2015.