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Data: FactSet; Chart: Axios Visuals

Evergrande, the Chinese property giant, was due to pay foreign bondholders $83.5 million Thursday as the semi-annual interest payment on its $2 billion bond due next year. It didn't.

Why it matters: This is the biggest missed coupon payment since the chaos of March 2020, and marks a key turning point in what could be one of the biggest and messiest corporate restructurings of all time.

The big picture: Missing a coupon payment doesn't automatically mean that Evergrande is in default — under the terms of the bond there's a 30-day grace period during which it can make the payment (as ordered by the Chinese government) and still be in good standing.

  • Between the lines: Given the Chinese arm-twisting, it seems fair to assume that if Evergrande had the money to make the coupon payment, it would. While the company can come to a private "resolution" with domestic bondholders, its foreign bonds are an all-or-nothing affair: Either it makes the coupon payment in full, or it's in default.
  • Flashback: The biggest missed coupon payment of last year came from Frontier Communications, which failed to make a $322 million interest payment on March 16, according to S&P. By April 15, the company had formally filed for Chapter 11 bankruptcy.

What's next: Evergrande has a hugely convoluted corporate structure, which privileges local banks over foreign bondholders. It's also acutely attuned to local political sentiment, which favors individual Chinese creditors who are owed either money or apartments or both.

  • Fixed-income analysts including Travis Lundy see little chance of a debt-for-equity swap that would give foreign bondholders a substantial stake in a restructured Evergrande.
  • The price of the 2022 bonds — they're now trading at just 29 cents on the dollar — implies that investors see not only a very high probability of default but also a very low recovery if and when the default occurs.

The bottom line: The Chinese government has a vested interest in preventing millions of its own citizens from losing money or property as a result of Evergrande collapsing. Foreign bondholders, however, are probably on their own.

Go deeper

Felix Salmon, author of Capital
Sep 23, 2021 - Economy & Business

Evergrande's share price collapse: The world's biggest no-big-deal default

Data: FactSet; Chart: Axios Visuals

The monster debt crisis that utterly failed to cause any catastrophe this week was that of Evergrande, the Chinese property giant.

Why it matters: Evergrande's share price has collapsed to pennies, its bonds are pricing in a default with very limited recovery, and even its customers are demonstrating across China. But so far the broader repercussions have been minimal.

2 hours ago - Health

FDA authorizes mix-and-match for COVID booster shots

Photo: Francine Orr/Los Angeles Times via Getty Images

The Food and Drugs Administration (FDA) on Wednesday gave its approval for Americans to get booster shots that are different from the COVID vaccine they initially received.

Why it matters: The recommendation from the FDA, which also authorized booster shots for people who received Moderna and Johnson & Johnson vaccines on Wednesday, paves the way for an expansion of booster shots.

GOP congressman forfeits committee seats after indictment

Rep. Jeff Fortenberry. Photo: Al Drago/Bloomberg via Getty Images

Rep. Jeff Fortenberry (R-Neb.) on Wednesday stepped down from his committee assignments after being indicted for lying to federal investigators amid a probe into illegal campaign donations.

What they're saying: In a letter to House Speaker Nancy Pelosi, Fortenberry said he is "grateful for the outpouring of support from my friends and colleagues as we work against the injustice confronting me."