Evergrande’s trading halted in Hong Kong as debt test looms

Uncertainty over firm's over $300-bn debt load continues to plague investors

Shares in China’s Evergrande Group and its property management unit were suspended from trading Monday, as a fresh debt test loomed for the developer underscoring broader risks that have left credit markets on edge.

Uncertainty over the full extent of Evergrande’s debt load, beyond its more than $300 billion reported in liabilities, has plagued investors since a liquidity crisis at the firm stoked fears of a collapse that could trigger financial and economic contagion.

People familiar with the matter have said that a dollar note maturing October 3 issued at an initial amount of $260 million by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande. As the maturity is a Sunday, the effective due date is Monday. The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.

Non-payment of the bond principal would constitute a default as the note has no grace period, although five business days would be allowed if failure to pay is down to administrative and

technical error, according to the people.

Details of the guarantees weren’t broadly known as the note prospectus isn’t publicly available and the deal wasn’t listed on exchanges. Monday is a holiday in China.

No reason was given for the trading halts in China Evergrande and Evergrande Property Services. The former’s shares have plunged 80 per cent this year and its bonds have tumbled to levels that suggest investors are bracing for a default. Evergrande has a market value of HK$39.1 billion.