As China Evergrande Group tries to quell concerns about its financial health, the property giant has gone to great lengths to publicize its shrinking debt load, reported Bloomberg.
The developer has, however, also been ramping up issuance of short-term IOUs. While not technically classified as debt, Evergrande’s growing reliance on such financing — known in China as commercial bills — suggests the company faces mounting liquidity pressure as banks and bond investors increasingly shy away from providing it with longer-term funds.
Evergrande’s main onshore subsidiary had about $32 billion of commercial bills outstanding as of December, the most of any major Chinese real estate company. Some bills issued by its units are now trading in the secondary market at implied yields as high as 36%, after a series of missed payments this year. By comparison, Evergrande dollar bonds due 2025 yield about 25%.
“The amount of Evergrande’s outstanding commercial bills is massive,” said Dong Ma, a Beijing-based partner at BG Capital, which specializes in high-yield bond investments. “It has apparently become a vital fundraising channel.”