China Evergrande’s chairman said that they will make it a top priority to help wealth investors to redeem their products. This is as the investors await a key deadline for a dollar-bond coupon payment. Hui Ka Yan said that the company was striving to ensure quality delivery of properties. He insisted on the importance to resume construction on developments where building had been halted.
Evergrande was founded in 1996. It is now facing a mounting pressure to quell anger among homebuyers and retail investors who have sunk their money into the group’s properties. Their shares, which have plunged around 85% this year, jumped as much as 32% in resumed trade. This marks their biggest single-day percentage rise since 2009. This bounce was mainly as a reaction to the news that an Evergrande unit had resolved a coupon payment with creditors. The chairman’s comments were clearly aimed at stabilizing markets. But there seems to be not much information for bond holders, as well as there is no clear plan as yet but they expect the debt to be restructured at some point.
Global investors have been on tenterhooks. Chinese Estates Holding who is the second-biggest shareholder of Evergrande, said that they had sold $32 million worth of its Evergrande stake and planned to completely exit the holding. The global markets were relieved when the People’s Bank of China’s injected 90 billion yuan into the banking system. Evergrande ran into trouble over the past few months as Beijing tightened regulations in its property sector. Paul Christopher, head of global market strategy at Wells Fargo Investment Institute stated that the company could restructure its debts. And then, the investors in the company’s financial instruments likely would suffer some losses.
A group of Evergrande bondholders had selected investment bank Moelis & Co and law firm Kirkland & Ellis as advisers on a potential restructuring of a tranche of bonds. U.S. Federal Reserve Chair Jerome Powell said that Evergrande’s problems seem particular to China and not as a parallel with the U.S. corporate sector, as per his view. After the Fed’s policy meeting, Powell told that in terms of the implications for them, there’s not a lot of direct United States exposure. The big Chinese banks are not tremendously exposed.
