Debt-laden China's Evergrande Group reportedly inched close to default as it faced a final deadline to make an offshore bond coupon payment yesterday, adding to concerns about cracks in the Chinese real estate and wider economy.

Evergrande, as reported in September, is wrestling with more than $300 billion in liabilities, including $19 billion in corporate bonds (source: Reuters). Thus far, the company has not defaulted on any of its offshore debt obligations. But a 30-day grace period on coupon payments of more than $148 million on its April 2022, 2023 and 2024 bonds ended yesterday.

Reuters reported that there was no word from Evergrande on payment, as of Wednesday evening Asia time, neither did the group respond to the newswire’s request for comment.

When the story first broke out that Evergrande was in trouble, it hit local Asian and wider markets. Although some worries had subsided, this week, the US Federal Reserve said that China’s real estate sector posed global risks.

The saga of the debt-laden property developer raises questions about how Beijing is trying to rein in parts of the economy as well as handle slowing growth and the inevitable after-shocks of the pandemic.

A report from Reuters today (11 November) said Evergrande again averted a default at the last minute, with a source saying several bondholders had received  overdue coupon payments. 

Bankruptcy case
A German data service that bought Evergrande's debt said this week that it is planning bankruptcy proceedings against the Asian organisation after it defaulted on interest payments again. 

DMSA Deutsche Markt Screening Agentur said today (Thursday11 November) that it is acting against China Evergrande Group, and urged other bond investors to join its bankruptcy case.

Evergrande defaulted on interest payments on two bonds in September, with the 30-day grace period still ending in October. 

DMSA said that unlike many other investors, it thought the group had clearly defaulted, paving the way for a financial crisis in China and globally.

"But while the international financial market has so far met the financial turmoil surrounding the teetering giant Evergrande with a remarkable basic confidence - one can also say: with remarkable naivety - the US central bank explicitly pointed out the dangers that a collapse of Evergrande could have for the global financial system."

To file for bankruptcy against the company as a creditor, DMSA bought Evergrande bonds, whose grace period expired on Wednesday. In total, Evergrande would have had to pay $148.13 million in interest on three bonds. "But so far we have not received any interest on our bonds," Metzler said.