Amid a surge in Chinese overseas corporate financing, and accompanying scrutiny from authorities, Evergrande may have bitten off a bit more than it can chew. The Chinese developer’s US$6.6 billion bond deal last week saw US$3.8 billion in new debt issued and US$2.8 exchanged. The bonds fell sharply in trading following the deal and were still trading below face value on Monday.
“There is a growing appreciation that Chinese companies will fund as much as they can offshore and that markets may struggle to digest the supply,” Owen Gallimore, credit strategist at ANZ was quoted by the Financial Times as saying.
“Evergrande’s deal was a lot of paper at one time,” Charles Chang, head of Asia credit strategy at BNP Paribas said. “People didn’t expect it but a healthy dose of scepticism does help when it comes to companies’ new issues.”
“I am generally a bit of a skeptic on this,” the WSJ quoted Harsh Agarwal, head of Asia credit research at Deutsche Bank as saying. “If this avenue closes down, you have to be sure that the company can repay the bond.”