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Shares in China Evergrande rose to a record high on Thursday after China’s largest property developer revealed plans to repay much of its costliest debt earlier in the week.

Hong Kong-listed shares rose as much as 5.5 per cent to HK$7.33 in the morning session as investors continued to react favourably to a Tuesday announcement the company would pay off half of its perpetual bonds – those without a repayment deadline – by the end of 2017.

Part of that continuing rally may be self-financed: after its stock closed 8.9 per cent higher on Wednesday, the company also disclosed in an exchange filing that it had repurchased 33.6m of its own shares at a cost of HK$221.8m.

Tuesday’s payment pledge came as the company disclosed net profit last year had fallen 51 per cent to Rmb5.1bn ($740m) thanks to a doubling of interest payments to perpetual bondholders. Evergrande’s net debt of $50bn was also 777 per cent of its equity as of December 31, compared to a sector average of 90 per cent in June.

That pressure to pay off debt is set to ratchet still higher thanks to a clause that pushes interest rates on those bonds up over time, with average cost of repayment for the company on perpetual bonds already at 9.5 per cent.

Copyright The Financial Times Limited 2017. All rights reserved.
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