China Evergrande investors left in dark after payment deadline passes

Evergrande's shares handed back some Thursday gains on Friday and fell 13 per cent, while stock of its electric-vehicle unit dropped 20 per cent to a four-year low.

China Evergrande has left global investors guessing over whether it will make a key interest payment, adding to fears that Beijing will let overseas bondholders swallow large losses as a liquidity crisis deepens at the world’s most indebted property company.

Evergrande owes US$305 billion, has run short of cash and investors are worried a collapse could pose systemic risks to China’s financial system and reverberate around the world.

A Thursday deadline for paying US$83.5 million in interest of a dollar bond passed without remark from Evergrande, and bondholders had not been paid nor heard from the company, two people familiar with the situation told Reuters.

The firm has a 30-day grace period and will default if that passes without payment.

Evergrande’s silence on the dollar bond interest payment and another US$47.5 million payment due next week contrasts with its treatment of its domestic investors. The company this week resolved one coupon payment on a domestic bond.

“This is part of the tactics of any sovereign driven restructuring process – keeping people in the dark or guessing,” said Karl Clowry, a partner at Addleshaw Goddard in London.

“The view from Beijing is offshore bondholders are largely Western institutions and so can justifiably be given different treatment. I think people think it’s still a falling knife.”

China’s central bank again injected cash into the banking system on Friday, seen as a signal of support for markets. But authorities have been silent on Evergrande’s predicament and China’s state media has offered no clues on a rescue package.