SHANGHAI, Oct 13 (Reuters) – Worries over possible spiralling effects of a debt crisis at developer China Evergrande Group (3333.HK) drove Chinese high-yield spreads to record highs on Wednesday, days after the company missed another dollar bond deadline.
The company, which has more than $300 billion in liabilities, on Monday missed its third round of interest payments on its dollar bonds in three weeks even as other firms warned of defaults.
In the clearest sign yet of global investors’ worries of spreading debt contagion, the option-adjusted spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index (.MERACYC) surged to a fresh all-time high of 2,337 basis points on Tuesday evening U.S. time, above a previous top of 2,069 basis points on Friday.
Investment grade spreads also jumped to their widest in more than two months. (.MERACCG)
“We see a risk that a disorderly correction in the property market could cause sharp price declines, hitting the personal wealth of homeowners,” Kim Eng Tan, a 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, and the contractors and service firms that support the developers.”
Evergrande did not pay nearly $150 million worth of coupons on three bonds due on Monday, following two other missed payments in September.
While the company has not technically defaulted on those payments, which have 30-day grace periods, investors say they are expecting a long and drawn-out debt restructuring process. read more
Chinese property companies’ bonds continued to fall on Wednesday, comprising seven of the top 10 losers among Shanghai-traded corporate bonds.
Dollar bonds also fell, although traders said limited market liquidity following earlier routs meant prices were only indicative, with tradeable prices possibly 10-20 points lower than screen prices.
Marketaxess quoted a Kaisa Group Holdings (1638.HK) June 2026 bond as falling 0.9% to 41.125 cents. Its yield has risen to around 40%.
Markets in Hong Kong were closed on Wednesday due to a typhoon affecting the city.
WALL OF DEBT
Evergrande’s main unit, Hengda Real Estate Group Co, faces a 121.8 million yuan onshore bond coupon payment on Oct. 19 and Evergrande has another $14.25 million dollar bond coupon due on Oct. 30. read more
Debt pressures extend far beyond Evergrande. Chinese property developers have $555.88 million worth of high-yield dollar bond coupons due this month, and nearly $1.6 billion due before year-end, and…