A keepwell agreement is an agreement between a parent company and its subsidiary that financial solvency will be kept through the agreed upon term. Scenery’s bonds have been issued with a ‘keepwell agreement’. We also walk through how much of these biggest Asian high yield funds own. Today, we take a look at bonds issued by both Evergrande (EVERRE) and Scenery Journey (TIANHL). This covered only the bonds issued directly by the Hong Kong-listed Evergrande. In the broadly tracked JP Morgan Asia Credit Index – Non-Investment Grade Total Return, China Evergrande Group has a weight of 1.5% while Scenery Journey takes up another 0.66% (as of the end of August), according to information provided to Morningstar by fund managers in our coverage universe.Įarlier this week, Morningstar talked about how much the six largest Asian high yield bond funds owned of Evergrande's issuances. “We believe credit risk is high given tight liquidity, declining contracted sales, pressure to address delayed payments to suppliers and contractors, and limited progress on asset disposals,” Fitch noted. dollars, from offshore investors.Įarlier this month, Fitch Ratings downgraded the Long-Term Foreign-Currency Issuer Default Ratings (IDR) of China Evergrande Group, and its subsidiaries, Hengda Real Estate Group and Tianji Holding, to reflect Fitch’s view that a default of some kind appears probable. Unlike bonds issued under Hengda, which are in RMB, Scenery raises money by issuing bonds in U.S. According to bondsupermart, there are four outstanding bonds issued by this subsidiary, which are due between October 2022 and November 2023. The coupon payment due on Wednesday came from the five-year bond issued by Hengda with an RMB 4 billion principal value, which is due in September 2025.Ī second such issuer is Scenery Journey, which is owned by Hengda through a holding company called Tianji Holding Limited. The firm is a Shenzhen-based unit that has issued Renminbi-denominated bonds. According to Evergrande’s annual report, Evergrande owns close to 60% of the onshore subsidiary, Hengda Real Estate. The market still needs some time to digest and to price this in.One of the issuers is Hengda Real Estate. “I think there be some negotiations between Evergrande and its lenders, so some sort of haircut is still possible. “Evergrande has tried its best to solve liquidity problems, but it’s a little bit difficult to gather enough capital to pay all the debt,” said Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong. The New York Times earlier reported that the developer made an interest payment, citing a person speaking on condition of anonymity. It still has nearly $338m in other offshore coupon payments coming due in November and December. “I only think they are buying time at this point,” the bondholder said.Įvergrande missed coupon payments totalling nearly $280m on its dollar bonds on 23 and 29 September and 11 October, beginning 30-day grace periods for each. One bondholder said he maintained a negative outlook for the developer despite it making the coupon payment. That still left them trading at discounts of more than 75% from their face value, with the 2023 bond yielding nearly 190%. Prices of the developer’s bonds jumped higher on Friday, with its 11.5% January 2023 bond surging more than 9%, and its 12% January 2024 bond up nearly 8% on the day, data from Duration Finance showed. Evergrande’s unfinished Taicang theme park.
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