Deadline for Evergrande’s Scenery Journey to repay debt

$82.49 million in coupon payments will come due today for China Evergrande Group’s subsidiary Scenery Journey.

Evergrande is struggling with massive debts amid a downturn in China’s property market, with sales down 39% from 2021. The property developer faces $8.1 billion in debt payments in 2022; another $255.2 million payment is due on June 29.

Evergrande reached an agreement with creditors last Wednesday to delay an $88 million payment for six months. It also set an end of July target for announcing a debt restructuring proposal and plans to offer special discounts to boost sales during China’s Golden Week holiday in October, with a projected sales target of $152.26 million.

Expect Evergrande to request a delay for today’s payments that extends the payment deadline beyond the end of Golden Week. Sales promotions will not generate enough new revenue to service Evergrande’s debts, which will likely cause future payment delays or selective defaults. Although property demand is expected to eventually recover due to China’s overall economic growth, the sheer size of Evergrande’s debts means the company’s collapse is a strong possibility in the coming years. If the firm does fail, expect an ensuing credit crisis and government intervention as banks and investors incur major losses.

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