HONG KONG: China Evergrande Group has already fallen behind on payments to banks, suppliers and holders of onshore investment products, and hasn’t given any indication that it paid two recent dollar bond coupons.

       The world’s most indebted developer may be facing its next big debt test from yesterday, underscoring the broader risks of opaque obligations in credit markets already on edge.

       Sources have said that a dollar note maturing Oct 3 issued at an initial amount of US$260mil (RM1bil) by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande.

       As the maturity is a Sunday, the effective due date is today.

       The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.

       Non payment of the bond principal would constitute a default as the note has no grace period, although five business days would be allowed if failure to pay is down to administrative and technical error, according to sources.

       Details of the guarantees weren’t broadly known as the note prospectus isn’t publicly available and the deal wasn’t listed on exchanges.

       Any failure to pay Jumbo Fortune’s note may also pose a risk of cross-default for Evergrande’s other bonds, according to Bloomberg Intelligence analyst Daniel Fan.

       Creditors of the Jumbo note could potentially ask the trustee to declare a formal default if they achieve a minimum threshold of investors, and that could trigger holders of other dollar bonds to do the same, he said.

       Uncertainly over the full extent of Evergrande’s debt load, beyond its more than US$300bil (RM1.25 trillion) reported in liabilities, has plagued investors since a liquidity crisis at the firm stoked fears of a collapse that could trigger financial and economic contagion.

       Authorities ranging from Federal Reserve officials to Hong Kong’s central bank are looking into just how exposed financial institutions are to the crisis.

       Standard Chartered’s head of China macro strategy Becky Liu expects Evergrande has more structured products such as guaranteed bonds, similar to the Jumbo Fortune note, with offshore dollar bonds making up just 6% of the firm’s total reported liabilities.

       The law firm White & Case is advising various investors with regard to Jumbo Fortune, a spokesperson for the firm said. — Bloomberg