Three 11th hour coupon payments were made by China Evergrande in the past two months, but there was no repeat at the end of a grace period at midnight Monday in New York, as some bondholders did not receive their dues, according to four sources.
Failure to make the $82.5 million in interest payments could be Evergrande's first offshore default on a public bond.
It is China's second largest property developer, with more than 1,300 developments and $110 billion in sales last year, $355 billion in assets and more than 1,300 developments nationwide. Evergrande grew quickly through a loan-backed land-buying spree and sold apartments quickly at low margins. It had 163,119 staff as of June-end, according to its interim report.
In September of last year, a leaked letter showing Evergrande pleading for government support to approve a now-dropped stock market listing has resulted in a sluggish growth. Sources told Reuters the letter was authentic, and Evergrande called it fake.
Evergrande said in June that it did not pay some commercial paper on time, and in July a court froze a $20 million bank deposit held by the firm at the bank's request.
The firm said in late August that construction had stopped at some of its developments due to missed payments to contractors and suppliers. It sought payment extension for trust and bank loans in September.
At June-end, Liabilities, including payables, totaled 1.97 trillion yuan $306 billion - equivalent to 2% of China's gross domestic product.
Evergrande accelerated its efforts to reduce debt last year after regulators introduced caps on three debt ratios, called the three red lines. It has been aiming to meet those requirements by the end of 2022.
It offered steep discounts on residential developments to spur sales and sold the bulk of its commercial properties. Since the second half of 2020 it has had a $555 million secondary share sale and raised $1.8 billion by listing its property management unit, while its EV unit sold a $3.4 billion stake.
It said in September that asset and equity disposal plans didn't make any progress. The company has sold new shares in the company and stakes in units such as HengTen Networks Group Ltd to raise capital.
In 2018, China's central bank said that companies like Evergrande could pose a systemic risk to the financial system.
The leaked letter showed that the firm's liabilities involved as many as 128 banks and over 121 non-banking institutions.
Late repayments could cause cross-defaults, as many financial institutions are exposed via direct loans and indirect holdings through different financial instruments.
Evergrande owns an office tower and residential development in Hong Kong, as well as a vast undeveloped land parcel.
It has spent billions of dollars on acquiring stakes in car technology developers, including Sweden's NEVS and the Netherlands' e-Traction. It has joint ventures with Germany's Hofer and Sweden's Koenigsegg.
Morgan Stanley said the process would involve coordination between authorities to maintain property projects, and negotiate with onshore creditors to ensure financing for project completion.
After operations stabilise, regulators would likely facilitate debt restructuring discussions with offshore creditors, according to Morgan Stanley.