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China Evergrande, strapped for cash, offloads its jets

SINGAPORE :

China Evergrande Group raised more than $50 million last month by selling two of its private jets, according to people familiar with the matter, bringing in much needed cash to help avert a default on its U.S. dollar debt.

American aircraft investors bought the planes, which were both Gulfstream jets, according to the people and a business aviation database. The sales closed in October, the same month that Evergrande made two overdue bond-coupon payments shortly before 30-day grace periods on them expired.

Shenzhen-based Evergrande recently owned at least four planes and has one more on order, according to online records and a person familiar with the matter. The property developer’s founder and chairman, Hui Ka Yan, splurged on luxury jets during the company’s heyday and used them to fly himself, Evergrande executives and others around the world. Other Chinese conglomerates like the formerly highflying HNA Group Co. also boasted flashy private jets with luxurious interiors.

The two Gulfstream jets Evergrande recently sold were its smaller aircraft. The company is currently seeking a buyer for a much larger Airbus ACJ330 wide-body jet, according to an advertisement for it.

That plane, for which Evergrande paid more than $220 million a few years ago, is sitting at Hong Kong International Airport, according to a person familiar with the matter. It has a highly customized “VVIP cabin interior” that includes a circular dining table surrounded by seats that can be converted into beds for sleeping, in addition to shower facilities, an entertainment lounge and bedrooms. It was designed to transport up to 40 passengers and 12 crew members. Commercial airlines often use Airbus A330 jets to fly more than 250 passengers.

Evergrande didn’t respond to a request for comment.

The company borrowed heavily and expanded aggressively for years, buying hundreds of parcels of land across China, building giant high-rise residential developments and selling many apartments years before they were completed. Evergrande also branched out into theme parks, healthcare services and electric vehicles. It bought a professional soccer team in its home province of Guangdong.

The spree left the Chinese property giant with the equivalent of roughly $300 billion in liabilities at the end of June, including about $20 billion in outstanding dollar bonds. Payments on several bonds are coming due over the next week.

Pre-pandemic flight records for one of Evergrande’s Gulfstream jets show it flew regularly from Guangzhou and Hong Kong to other major cities including London, Los Angeles and Boston. It also made trips to the islands of Saipan and Bali.

The company sold that plane, a five-year-old G650ER ultralong-range aircraft that can seat 15 passengers, for less than $40 million in late October, the people familiar with the matter said. The buyer was Earth Air Inc., a company backed by private aviation investors that operates out of Los Angeles and owns two similar Gulfstream jets.

Alex Joya, president and partner at Earth Air, confirmed his company recently purchased the plane but said he couldn’t disclose details of the transaction.

The other Gulfstream offloaded by Evergrande was an older jet that sold for roughly $15 million, according to a person familiar with the matter. The buyer was Aviation Sales Associates, which operates out of California. A company representative declined to comment on the transaction.

Cash flow problems mounted at Evergrande over the summer and its bond prices plunged to distressed levels, preventing the company from turning to the capital markets to raise more funds. On Sept. 23, Evergrande missed $83.5 million in coupon payments on about $2 billion in dollar-denominated bonds. Days later, it missed another $45 million coupon payment on $951 million in bonds. It then made good on both payments in late October.

The company hasn’t disclosed how it came up with the money to make the interest payments. Had Evergrande failed to meet the deadline, offshore bondholders could have declared it in default. The company is on the hook for more bond payments in the coming months and its financial advisers are currently in talks with advisers representing offshore bondholders.

Evergrande’s flagship onshore property-development unit, Hengda Real Estate Group Co., has $82 million in interest payments due Saturday on two sets of dollar bonds issued by its Scenery Journey Ltd. unit, according to CreditSights research. Meanwhile, a 30-day grace period to make overdue payments totaling $148 million on three other sets of Evergrande bonds ends Nov. 11, according to CreditSights.

Earth Air has already put the jet it bought from Evergrande up for sale. An online ad notes the plane has spent more than 1,400 hours in the air and has a glossy interior that includes lounges, a refrigerator and oven. The asking price: $43.9 million.

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