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Distressed bond funds and retail investors are flocking to bonds issued by Chinese real estate developer Evergrande, betting that Beijing will be forced to bail out the country’s most debt-ridden company.
Buying Evergrande debt in a hurry is like many pension funds, insurance companies and other more conservative institutional investors have. Keep a distance From the group inside Fear of transmission With the Chinese real estate market Global financial system..
“Evergrande is very interesting, but it’s a very complex situation that can happen in the next few years,” said Marathon Asset Management, one of the fund’s clutches in Evergrande. Jason Friedman says.
US funds Saba Capital Management, Redwood Capital Management, Silverpoint Capital and Contrarian Capital Management have also purchased Evergrande bonds in recent weeks, according to people familiar with the matter.
After the Shenzhen-based group, the uncertainty about the future of the Evergrande group increased I didn’t meet the deadline We paid $ 83.5 million on dollar-denominated bonds last Friday, triggering a 30-day grace period before the official default. Evergrande has not announced about that payment or whether it has made another coupon payment of about $ 45 million to be paid on Wednesday.
Investor attention has shifted to Evergrande’s other looming obligations, according to Bloomberg data, but bond trading, which was due to be paid coupons last week, surged, with trading volume of $ 124 million on Wednesday. Beyond.
Louis Tse, managing director of Hong Kong-based brokerage firm Wealthy Securities, said Evergrande’s “heavy and heavy trading” of dollar bonds in a recent session led Beijing to restructuring rather than permitting the company. It collapses, saying it was partially driven by distressed bond investors who buy in anticipation of.
“They are confident that there is a solution to whatever happens throughout Evergrande,” Tse said.
Recovering losses from Evergrande can be a daunting task.The company will be on Wednesday Sold 20% stake Raised $ 1.5 billion at a regional bank in China, which is less than 1% of total debt over $ 300 billion.
According to traders, many long-term bondholders have already shifted out of Evergrande prior to last week’s due date, and investors are cycling in instead. This is a strategy called bottom feeding.
“These are mostly distressed sharks trying to make quick money,” said one Hong Kong-based fixed income investor.
Evergrande, one of the largest borrowers in the Asian corporate dollar bond market, issues $ 20 billion in dollar-denominated bonds. Bonds due in March 2022 are trading at around $ 0.26 for $ 1 this week.
Another Hong Kong-based family office investor said he bought the first evergrande debt last week, hoping that the Chinese government would eventually coordinate the country’s largest restructuring.
The central bank, the People’s Bank of China, called on its financial institutions this week to protect the “stable and healthy development” of the real estate market and the “legal rights and interests” of homebuyers.
“I’m betting that this will be resolved out of court through low-priced tender offers and debt-to-equity. [swap]Or whatever, “said the investor.
He bought a notebook issued by Evergrande’s major land subsidiary, Hengda Real Estate, when it was trading for nearly $ 0.16 for $ 1. He expected to almost double his money in the coming months.
“This is not a fundamental analysis, but most default Chinese bonds are trading above this level,” he said. “I am aiming for my thirties.”
Investors quoted dollar bonds issued by other Chinese companies, sometimes priced between $ 0.20 and $ 0.30 in dollars, despite defaults State-led restructuring efforts.. They included the Beijing-backed high-tech company Tsinghua Unigroup, the Peking University Founder Group, and the real estate developer China Fortuneland Development.
The market is preparing for Evergrande’s next debt repayment deadline on October 11, when developers will pay a total of about $ 150 million in coupons for $ 3 bonds.
US credit funds Sabah, Redwood, Silverpoint and Contrarian declined to comment.
Additional report by Wang Xueqiao in Shanghai and Thomas Hale in Hong Kong
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