Highly indebted mainland developer China Evergrande to pay double-digit interest on US dollar bonds
- Hong Kong-listed developer says its offshore units will issue the bonds and that its chairman will buy up to US$1 billion of notes
- Analysts expect trend of high refinancing costs to haunt other Chinese builders as liquidity conditions tighten
China Evergrande Group, the mainland’s most indebted developer, is resorting to high-interest US dollar bonds, mostly in the double digits, to refinance existing loans, with analysts expecting a similar trend at other builders amid tightening liquidity.
The company’s short-term debt totalled 299 billion yuan (US$43 billion) at the end of June, according to S&P. The short-term debt accounted for 44 per cent of total debt, from 49 per cent in 2017.
According to Bloomberg, Evergrande’s overall debt load which stood at a whopping 671 billion yuan in the first half, was cut by 8.4 per cent after it repaid some bank loans.
Chinese developers face surging refinance demand as US$34.8 billion of onshore bonds and US$17.9 billion of offshore bonds mature or become puttable in the next 12 months, according to Moody’s.
The Guangzhou-based developer said in a filing to the Hong Kong stock exchange on Tuesday that its offshore entities propose to sell US dollar denominated bonds and that its billionaire chairman Hui Ka Yan has “expressed interest” to buy up to US$1 billion of the notes on offer.
