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Evergrande ripples through Asian high yield

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Asian high yield has always been dominated by Chinese real estate, so the Evergrande crisis has shut down the market for new issuance. Is this the chance for non-Chinese issuers to step up?

Asia’s high-yield bankers and investors are watching the plight of Evergrande with a sense of helplessness.

In mid October, the sprawling Chinese real estate developer is about halfway through a 30-day grace period to remedy a default on an offshore dollar bond on September 23. The missed payment, for $83.5 million, is very much the tip of the iceberg. Evergrande has $20 billion of offshore bond borrowings, which in turn are a fraction of its $300 billion overall liabilities.

Few are expecting a positive outcome.

“There’s a playbook to these things that goes right back to the 1990s,” says an Asian private wealth manager. “And that playbook is: foreign bondholders are screwed.”

Now it is more of a question of how far the ripples go. A second default, for a smaller developer called Fantasia Holdings, has already followed.

There is such sensitivity in this area that we allowed all 10 bankers and investors that Euromoney interviewed for this story to remain on background.

“Evergrande

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Chris Wright is Asia editor. He covers the Asia Pacific region and is based in Singapore. He has previously been Middle East editor of Euromoney, editor of Asiamoney, investment editor of the Australian Financial Review and a correspondent on emerging markets and sovereign wealth for numerous publications worldwide. He has also written two books.
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