Home Economy FirstFT: Evergrande bondholders left in the dark as crucial deadline passes

FirstFT: Evergrande bondholders left in the dark as crucial deadline passes

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Investors in an Evergrande offshore bond say they have yet to receive a closely watched interest payment that was due on Thursday, adding to uncertainty over an unfolding liquidity crisis at the world’s most indebted property developer.

The $83.5m payment had a deadline of midnight in New York on Thursday, or noon on Friday in Hong Kong. Two people with direct knowledge of the matter said that no payment had been received on Friday morning in Hong Kong.

The property group, which has not made a statement on the repayment, has a 30-day grace period before any failure to pay officially results in a default.

Evergrande, which had been widely expected to default for weeks, is at the centre of an unfolding storm over the health of China’s vast property sector as the government seeks to crack down on excessive debt.

Its woes shook global stock and commodity markets this week ahead of the impending payment deadline, as traders weighed the implications of a slowdown across a real estate industry that has anchored China’s economic growth for decades.

The developer, which faces total liabilities of more than $300bn, warned in August of the risk of default after a rare public rebuke from Beijing. Falling prices of its debt helped push yields higher across the $400bn Asian high-yield bond market, where it is one of the biggest borrowers.

Line chart of Yield (%) showing Evergrande crisis ignites sell-off in riskier Asian dollar bonds

Read more:

Five more stories in the news

1. Rishi Sunak to tighten financial regulations after Greensill scandal UK chancellor Rishi Sunak has ordered two immediate reviews of financial regulation related to the collapse of Greensill Capital as he accepted some recommendations from a report by a committee of MPs into the scandal.

2. Goldman exec who led consumer banking launch to depart Harit Talwar, who spearheaded Goldman Sachs’ push into consumer banking, is leaving the bank in October, 10 months after he handed over day-to-day running of the business. The departure crystallises a transition to a new phase of leadership at its consumer business.

3. Aukus pact is ‘insult to a Nato partner’, says Merkel adviser The new Indo-Pacific security pact between the US, UK and Australia is an “insult to a Nato partner” and US president Joe Biden is treating allies in the same way his predecessor Donald Trump did, according to German chancellor Angela Merkel’s longtime foreign policy adviser.

4. Hedge funds reap windfall from commodity markets Hedge funds that expanded into UK natural gas and German electricity have made big gains this year from the European energy crisis and sharp moves in specialist commodity markets, with one fund soaring more than two-fifths.

5. Tories fear voter backlash from rising cost of living UK chancellor Rishi Sunak is under growing Tory pressure to soften the impact of rising living costs this winter, with one MP drawing parallels with the pain of the 1970s and 1980s. Families face higher energy bills, rising food prices and — according to the Bank of England — inflation heading above 4 per cent.

Coronavirus digest

  • Companies in Vietnam have warned that a prolonged lockdown puts at risk the country’s status as a manufacturing hub.

  • Joe Biden’s vaccine booster plan has suffered a fresh setback as the US Centers for Disease Control and Prevention voted not to endorse a third jab for those working in jobs with high risk of exposure to Covid-19.

  • Novavax has applied for emergency use authorisation of its vaccine from the World Health Organization.

  • The UK has issued a last-minute quarantine waiver for ministers from “red list” countries attending the UN climate summit in Glasgow.

Column chart of Number of delegates showing COP attendance grows, spiking in treaty years

The days ahead

UK Labour party conference The annual summit will begin in Brighton on Saturday. Labour leader Sir Keir Starmer is expected to focus heavily on the cost of living crisis. Ahead of the conference, Starmer was facing pressure to delay plans to rewrite Labour’s leadership election rules.

Germany’s election Rarely has such a crucial democratic exercise been tinged by so much uncertainty. Never before have Germans faced such a broad spectrum of possible electoral outcomes. Follow Sunday’s vote with our poll tracker and Europe Express newsletter.

Live updating charts of the latest voting intention polls for the German Bundestag elections.

What else we’re reading

Collapsed Blackstone deal shows ‘everything is political’ in China After the buyout group was forced to call off a $3bn deal to buy property developer Soho China, the private capital industry is reassessing how to place its bets on the world’s second-largest economy. The episode underlined that even the highly connected can struggle to navigate the country’s political environment.

Could nuclear play a vital role in UK energy crisis? Sellafield — once the site of the UK’s infamous Windscale fire and now one of the world’s largest nuclear sites — has come to the forefront of a debate about Britain’s energy future. Many think nuclear power is vital if the country is to achieve net zero emissions by 2050, a goal to which the government is legally committed, writes Jonathan Ford.

An image shows a dome at the Sellafield nucelar site in Cumbria
Cumbria’s Sellafield nuclear site was renamed in the 80s in a bid to reinvent the site of the 1957 Windscale fire © David Moir/Reuters

Five takeaways from the latest Fed meeting The Federal Reserve’s meeting this week concluded with a clear message: monetary policy in the US is about to become a lot tighter. From debt ceiling woes to fears of contagion from the debt crisis at China’s Evergrande, FT’s Colby Smith breaks down the takeaways from this week’s meeting.

Provence property dreams hit by lack of homes Buying a home in rural France was never easy. But since the pandemic struck, potential buyers face growing demand for rural abodes, agents complain of a shortage of supply, and those who do find a home must complete renovation jobs to bring their period farmhouses up to date, Hugo Cox writes.

Fashion

The FT’s Lauren Indvik sends a dispatch from London Fashion Week, during a trying moment for British haute couture. She highlights energetic debuts from Steven Stokey-Daley and Harris Reed, and an appearance from mayor Sadiq Khan that enlivened a somewhat muted schedule.

Members of the National Youth Theatre model SS Daley’s debut solo show
Members of the National Youth Theatre model SS Daley’s debut solo show © Haydon Perrior/Thomas De Cruz Media

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