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Evergrande makes coupon payment before Friday deadline -sources

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Developer China Evergrande Group has made an interest payment for an offshore bond before a grace period expired on Friday, two people with direct knowledge of the matter said, narrowly averting a catastrophic default for the second time in a week.

Evergrande, once China’s top-selling developer, is reeling under more than $300 billion in liabilities, fuelling worries about the impact of its fate on the world’s second-largest economy as well as on global markets.

The property developer, which staved off a default last week by securing $83.5 million for the last-minute payment of interest on a bond, needed to make $47.5 million in coupon payments to bondholders by Friday.

A failure to pay by the Friday deadline would have triggered cross-defaults on all of the company’s $19 billion worth of bonds in international capital markets, in what would have been the world’s second-largest emerging market corporate debt default.

Evergrande did not respond to Reuters’ request for comment. The people declined to be identified due to the sensitivity of the matter.

Reuters was not able to determine the source of the funds used to make the interest payments. Bloomberg News reported earlier this week that Chinese authorities had urged Evergrande’s founder, Hui Ka Yan, to pay the developer’s debts out of his personal wealth.

Shares of Evergrande gave up early gains to fall about 0.8% by late morning on Friday, versus a 0.3% decline in the Hang Seng Index. The Hang Seng Mainland Properties Index fell about 0.9%, while an index of developers’ mainland A-shares dropped 3.6%.

Prices of the developer’s bonds jumped higher on Friday, with its 11.5% January 2023 bond surging more than 9%, and its 12% January 2024 bond up nearly 8% on the day, data from Duration Finance showed.

That still left them trading at discounts of more than 75% from their face value, with the 2023 bond yielding nearly 190%.

One bondholder said he maintained a negative outlook for the developer despite it making the coupon payment.

“I only think they are buying time at this point,” the bondholder said.

Evergrande missed coupon payments totalling nearly $280 million on its dollar bonds on Sept. 23, Sept. 29 and Oct. 11, beginning 30-day grace periods for each.

It still has nearly $338 million in other offshore coupon payments coming due in November and December.

The New York Times earlier reported https://www.nytimes.com/live/2021/10/28/business/news-business-stock-market that the developer made an interest payment, citing a person speaking on condition of anonymity.

“Evergrande has tried its best to solve liquidity problems, but it’s a little bit difficult to gather enough capital to pay all the debt,” said Cliff Zhao, chief strategist at China Construction Bank International in Hong Kong.

“I think there (will) be some negotiations between Evergrande and its lenders, so some sort of haircut is still possible. The market still needs some time to digest and to price this in.”

DEBT CRISIS

Evergrande’s woes have snowballed for months and its dwindling resources set against its vast liabilities have wiped out 80% of its value, leading some analysts to consider default at some point inevitable.

Even as Evergrande secures funds to make payments, other Chinese developers whose fortunes have been hit by market concerns over Evergrande’s debt crisis have slid into formal default.

Fantasia Holdings Group Co Ltd, Sinic Holdings (Group) Co Ltd, China Properties Group Ltd and Modern Land (China) Co Ltd have all defaulted on dollar debt obligations this month.

Other developers with significant dollar debt have proposed extending offshore bond maturities or undertaking debt restructuring in a meeting with regulators, sources have said.

In a meeting with developers this week, China’s National Development and Reform Commission (NDRC) and the State Administration for Foreign Exchange told developers facing large offshore debt maturities to evaluate repayment risk and report difficulties.

The NDRC also implored developers to meet offshore debt obligations, and maintain their reputations and market order.

“Selective defaults in the offshore market are emphatically not acceptable for the authorities, and the NDRC clarification this week should reassure offshore investors that they will be treated fairly alongside onshore investors,” DBS strategist Wei Liang Chang said in a client note.

Even developers who have not defaulted have seen their share and bond prices walloped. On Friday, Chinese Estates Holdings Ltd said it would book an aggregate loss of HK$1.36 billion in the current fiscal year from the sale of all of its bonds issued by peer Kaisa Group Holdings Ltd.

Concerns over the systemic impact of a default by Evergrande have widened spreads on Chinese high-yield dollar debt to record levels as investors demand higher risk premiums.

Investor worries have also kept the cost of insuring against default on China’s sovereign debt elevated. That cost earlier this month touched its highest level since the height of the pandemic in 2020.

BANK EXPOSURE

Founded in Guangzhou in 1996, Evergrande epitomised a freewheeling era of borrowing and building. But that business model has been scuttled by hundreds of new rules designed to curb developers’ debt frenzy and promote affordable housing.

Any prospect of Evergrande’s demise raises questions over the fate of more than 1,300 real estate projects it has ongoing in some 280 cities.

Bank exposure to developers is also extensive.

A leaked 2020 document, branded fake by Evergrande but taken seriously by analysts, showed the developer’s liabilities extended to more than 128 banks and over 121 non-banking institutions.

(Reporting by Svea Herbst-Bayliss, Clare Jim and Andrew Galbraith; Additional reporting by Tom Westbrook; Writing by Megan Davies and Sumeet Chatterjee; Editing by Stephen Coates and Christopher Cushing)

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CN trains rolling again after B.C. tracks repaired amid mounting backlogs – CBC.ca

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Amid growing backlogs, Canadian National Railway Co. says trains are moving again in southern British Columbia after the third atmospheric river in two weeks descended on the region.

CN says service resumed Sunday after crews worked around the clock on the Vancouver-Kamloops corridor, which was first cut by mudslides and washouts amid torrential rain in mid-November.

The country’s largest railroad operator restored limited activity along the vital supply link late last month before opting to close the line again a week ago as more downpours triggered further flooding, landslides and debris.

“CN crews will continue to monitor both the rail infrastructure as well as the terrain over the coming days and weeks,” CN spokesperson Jonathan Abecassis said in an email.

An aerial view of the Port of Vancouver taken Nov. 21. After service was suspended due to weather-related track damage, freight is now moving by rail again in and out of the city’s port. (Gian Paolo Mendoza/CBC)

The restored connection will allow freight to flow to and from the Port of Vancouver and begin to clear the massive backlogs of incoming shipping containers and outgoing grain.

The repaired lines will also allow Canadian Pacific Railway Ltd, which shares tracks with CN through part of the Fraser Valley, to boost its shipments.

End of year is a critical time for shipment of grain — canola in particular — with the bulk of Canadian grain transported via rail to B.C. ports.

Some can be diverted to Prince Rupert, B.C., the United States or Thunder Bay, Ont., but the window for the latter is nearly closed as winter ice looms, while rail cargo generally is hard to divert en masse.

“Regardless of when the traffic on the mainlines resume handling normal levels of traffic, the reverberations back through the grain supply chain in Western Canada (and all commodities) will be measured in months,” Steve Pratte, policy manager at the Canadian Canola Growers Association, said in an email.

Grain strain

The backlog of Prairie grain may lose much of its value if trains can’t ship it to port before spring, when prices typically drop amid heightened global supply, according to the Western Grain Elevator Association.

Contract extension penalties and demurrage fees — issued by a shipping line when freight exceeds the time allotted at a terminal — also present a threat for farmers and grain elevators trying to clear out brimming barns and silos.

The number of grain cars unloaded at West Coast ports dropped by 83 per cent year over year in the third week of November, according to the federal grain monitoring program’s latest update.

As of Nov. 28, there were 24 grain vessels at berth or at anchor around the Port of Vancouver waiting for deliveries of up to 1.4 million tonnes of grain — mainly wheat, canola and barley — the update states.

“These shipments are critical to ensure that Canadian farms get the cash flow required to cover the operating costs accumulated through the season, and it is a race against winter every year to try to get as much grain to port before winter conditions settle in,” Geoff Backman, markets manager at the Alberta Wheat and Barley Commission, said in a statement.

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SEC probing Tesla after whistleblower alleges company hid solar panel fire risk – CBC.ca

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The U.S. securities regulator has opened an investigation into Tesla Inc. over a whistleblower complaint that the company failed to properly notify its shareholders and the public of fire risks associated with solar panel system defects over several years, according to a letter from the agency.

The probe raises regulatory pressure on the world’s most valuable automaker, which already faces a federal safety probe into accidents involving its driver assistant systems. Concerns about fires from Tesla solar systems have been published previously, but this is the first report of investigation by the securities regulator.

The U.S. Securities and Exchange Commission (SEC) disclosed the Tesla probe in response to a Freedom of Information Act request by Steven Henkes, a former Tesla field quality manager, who filed a whistleblower complaint on the solar systems in 2019 and asked the agency for information about the report.

“We have confirmed with Division of Enforcement staff that the investigation from which you seek records is still active and ongoing,” the SEC said in a Sept. 24 response to Henkes, declining his request to provide its records. The SEC official said the letter should not be taken as an indication by the agency that violations of law had occurred.

Reuters was able to confirm the response.

Safety violations

Henkes, a former Toyota Motor quality division manager, was fired from Tesla in August 2020, and he sued Tesla, claiming the dismissal was in retaliation for raising safety concerns. Tesla did not respond to Reuters’ emailed questions, while the SEC declined to comment.

In the SEC complaint, Henkes said Tesla and SolarCity, which it acquired in 2016, did not disclose its “liability and exposure to property damage, risk of injury of users, fire etc to shareholders” prior and after the acquisition.

Tesla also failed to notify its customers that defective electrical connectors could lead to fires, according to the complaint.

Tesla told consumers that it needed to conduct maintenance on the solar panel system to avoid a failure that could shut down the system. It did not warn of fire risks, offer temporary shutdown to mitigate risk, or report the problems to regulators, Henkes said.

The whistleblower alleges that more than 60,000 residential customers were sold solar panels that were defective and dangerous. (Patrick T. Fallon/Bloomberg)

More than 60,000 residential customers in the U.S. and 500 government and commercial accounts were affected by the issue, according to his lawsuit filed in November last year against Tesla Energy over wrongful termination.

It is not clear how many of those remain after Tesla’s remediation program.

Safety calls ignored, whistleblower alleges

Henkes, a longtime quality manager at Toyota’s North American quality division, moved to SolarCity as a quality engineer in 2016, months before Tesla acquired SolarCity. After the acquisition, his duties changed and he became aware of the widespread problem, he told Reuters.

Henkes, in the SEC complaint, said he told Tesla management that Tesla needs to shut down the fire-prone solar systems, report to safety regulators and notify consumers. When his calls were ignored, he proceeded to file complaints with regulators.

“The top lawyer cautioned any communication of this issue to the public as a detriment to the Tesla reputation. For me this is criminal,” he said in the SEC complaint.

Litigation and concerns over faulty connectors and Tesla solar system issues stretch back several years. Walmart in a 2019 lawsuit against Tesla said the latter’s roof solar system led to seven store fires. Tesla denied the allegations and the two settled.

Business Insider reported Tesla’s program to replace defective solar panel parts in 2019.

Several residential customers or their insurers have sued Tesla and parts supplier Amphenol over fires related to their solar systems, according to documents provided by legal transparency group PlainSite.

Henkes also filed a complaint with the U.S. Consumer Product Safety Commission, which CNBC reported this year was investigating the case. CPSC and Amphenol didn’t respond to requests for comment.

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COVID-19 antiviral drug molnupiravir to be manufactured in Canada – CTV News

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TORONTO —
Merck Canada announced on Monday that it is partnering with Thermo Fisher Scientific to manufacture the investigational COVID-19 antiviral drug molnupiravir at a facility in Whitby, Ont., for distribution to global markets.

The Canadian location will produce doses of molnupiravir, developed in collaboration with Ridgeback Biotherapeutics, for distribution in Canada, the U.K., the European Union, Asia Pacific, and Latin America, pending approvals in those respective regions. The drug is awaiting approval by Health Canada.

The facility was chosen because of its capacity, capability, and the speed with which it is able to produce the drug, Merck Canada’s new president Marwan Akar said during a press conference.

Thermo Fisher’s existing Whitby manufacturing site is one of three locations in the world that will produce molnupiravir.

“We are marking a very key milestone, and rebuilding Canada’s biomanufacturing capability,” Minister of Innovation, Science and Industry Francois-Philippe Champagne said during the news conference.

“We’ll be producing COVID medications for Canadians and indeed for the world…so to me this is a very big step in how we intend to reveal our biomanufacturing sector in Canada.”

Earlier in the pandemic, Canada came under criticism for its inability to manufacture COVID-19 vaccines domestically, leaving Ottawa reliant on U.S. and European manufacturers to produce and provide doses.

Minister Champagne said the latest announcement is part of the government’s efforts to ensure Canada is better prepared and that “we redesign the supply chain so whatever may come next, we would be ready.”

The new manufacturing deal will also help Ontario’s economic recovery with a $19 million capital investment supporting more than 50 high-paying jobs in the region, according to Victor Fedeli, Ontario Minister of Economic Development, Job Creation and Trade.

Last week, the federal government signed a deal with Merck to purchase 500,000 molnupiravir pills, with an option for another half million, pending approval. Request for approval of the drug was submitted in August.

Antiviral drug treatments are considered another tool in the fight against COVID-19, experts say, after personal protective equipment, testing, and vaccines.

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