Evergrande’s debt problems push Chinese spreads to record highs

SHANGHAI: Concerns over the possible spiraling effects of a debt crisis at developer China Evergrande Group drove Chinese high-yield spreads to record highs on Wednesday, days after the company missed another bond deadline in dollars.
The company, which has liabilities of more than $ 300 billion, missed its third round of interest payments on its dollar bonds in three weeks on Monday, even as other firms warned of defaults. payment.
The clearest sign to date of global investor concerns about the spread of debt contagion, the corrected option spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers index has jumped to a new all-time high 2,337 basis points Tuesday night US time, above a previous high of 2,069 basis points on Friday.
Investment grade spreads also hit their highest level in over two months. “We see a risk that a disorderly correction in the real estate market could cause prices to fall sharply, affecting the personal wealth of homeowners,” Kim Eng Tan, credit analyst at S&P Ratings, said in a report. “Such an event could also contribute to large-scale losses by investors in wealth management products, as well as by entrepreneurs and service companies that support developers.”
Evergrande failed to pay nearly $ 150 million in coupons on three bonds due Monday, following two more missed payments in September. While the company has technically not defaulted on those payments, which have 30-day grace periods, investors say they expect a long and drawn-out debt restructuring process.
Chinese real estate company bonds continued to fall on Wednesday, including seven of the top 10 losers among Shanghai-traded corporate bonds. Bonds issued by developers including China Aoyuan Group and Country Garden Properties Group fell between 1.6% and 7.4%

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