The NDRC and SAFE notice comes days after Evergrande paid $ 83.5 million in overdue interest on an offshore bond just before a grace period expired.
China’s NDRC (National Development and Reform Commission) and SAFE (State Exchange Administration) have called on companies in “key industries†in the country to ensure that their foreign debt is repaid.
The guidance, given in the form of a Symposium on Foreign Debt of Key Industries and Enterprises, is aimed at maintaining the healthy and stable development of the overseas bond market for Chinese-owned enterprises, NDRC said. in a notice.
At the meeting, officials stressed the need for domestic companies to meet their external debt repayment needs, continuously optimize their external debt structures, and use only external debt to raise funds in advance. strict compliance with approved uses and market rules.
NDRC and SAFE officials called on companies in “key sectors” to buy back the principal and interests of their bonds abroad, in order to protect their reputation and “the general order of the market.”
While the notice does not specifically name real estate as a key sector or indicate which companies attended the symposium, it comes days after Evergrande paid $ 83.5 million in overdue interest on a dollar-denominated bond that was due last month, just one day before a 30-day grace period expired.
The company has so far remained silent on a spate of missed coupon payments on its USD-denominated bonds and was only fulfilling its domestic payment obligations, raising fears that international bondholders take the brunt the developer’s liquidity issues.
According to Bloomberg, Chinese authorities have asked Evergrande chairman Hui Ka Yan to use his personal wealth to pay off the company’s debts. Hui’s net worth is estimated to be around $ 11.3 billion, down nearly 70% from 2020, reports the FT.
Instructions to Hui signal that a state bailout is unlikely. But, policymakers appear to be working behind the scenes to ensure that all struggling developers, including Evergrande, undergo an orderly process of debt restructuring so that unfinished real estate projects can be completed and delivered.
Evergrande itself has been ordered to resume its housing projects in metropolitan France to meet its commitments to buyers. The company has since resumed construction on some of its residential housing projects.
The company has another $ 47.5 million interest payment due on another offshore bond on Friday (October 29), when the 30-day grace period expires, along with several other bond payments. due before the end of the year. An additional $ 7.4 billion in onshore and offshore bonds will also mature in 2022.
Evergrande had hoped to pay off debt using the proceeds from the asset sale, but recently ended talks to get rid of its Hong Kong headquarters and a stake in its real estate services unit.
Last week, Chinese regulators said the Evergrande crisis was an “isolated” situation and that any spillover from a crisis at the property developer was “controllable.”
Yet the fallout from the Evergrande crisis has become more evident in recent weeks due to defaults by property developers Fantastia, Sinic Holdings and China Properties Group.
On Tuesday (October 26), another developer, Beijing-based Modern Land, said it had failed to repay a $ 250 million bond that was due on October 25, citing “unexpected liquidity issues” related to it. to the economy, to the real estate sector and to the pandemic.
The default brought the number of defaults on USD-denominated bonds by Chinese real estate companies to nine this year, according to a report by Industrial Securities.