(Bloomberg) — China Evergrande Group pulled back from the brink of default by paying a bond coupon before this weekend’s deadline, according to people with knowledge of the matter, the latest twist in a months-long drama that has captivated global investors.

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The company wired the $83.5 million payment and bondholders will receive the funds before Saturday, the people said, asking not to be identified because the transaction is private. A 30-day grace period for the bond coupon would have expired on Saturday after the firm missed the original payment date. An Evergrande representative declined to comment.

Speculation about a default has been swirling for months, stoking credit-market contagion among other cash-strapped developers and eroding confidence in a Chinese real estate market that by some measures accounts for more than a quarter of the economy.

The development suggests the embattled property developer may put a bigger-than-anticipated priority on dollar-bond obligations as it struggles to raise funds to meet payments owed to banks, suppliers and holders of onshore investment products. Financial regulators have encouraged Evergrande to take all measures possible to avoid a near-term default on dollar bonds, while focusing on completing properties and repaying individual investors.

“The payment looks like an attempt to kick the can down the road, given its tight liquidity situation,” said Wu Qiong, executive director at BOC International Holdings. “Nevertheless, the dollar bond interest payment is positive and buys the time Evergrande needs for asset sales, strengthening the base-line case of an orderly restructuring.”

The payment was earlier reported by state-backed newspaper Securities Times.

Markets took the news positively, with shares of Chinese developers surging for a second day in Hong Kong. Junk dollar notes from the country’s issuers were set for their best week since 2012. Evergrande’s dollar bonds were indicated up as much as 3 cents on the dollar, according to credit traders. Its shares climbed 5% in Hong Kong.

Evergrande needs to pay interest on another four dollar notes this year. It has a hefty wall of maturing debt next year with some $7.4 billion coming due in onshore and offshore bonds.

The recent collapse of talks to sell a stake in a unit for $2.6 billion has highlighted the difficulty the company faces raising funds through asset sales. Evergrande said late Wednesday that its property sales plunged about 97% during peak home-buying season and that it may not be able to meet its financial obligations. The company has more than $300 billion in liabilities.

“Evergrande is a candle burning on both ends, it needs to address declines in revenue and at the same time find cash for looming repayments,” said Justin Tang, the head of Asian research at United First Partners. “Nothing short of a restructuring or white knight will do.”

Still, payment of the coupon may help ease concern over the health of China’s property sector. A government clampdown on leverage at indebted developers and measures to cool home prices have spurred a slump in sales and weighed on economic growth. At least three developers defaulted on their dollar debt this month as junk bond yields surged to a decade-high.

Regulators in Beijing have been seeking to reassure markets that the world’s second-largest economy can weather the crisis at Evergrande and its smaller rivals, with Vice Premier Liu He becoming the highest-ranking official to assure that risks in the property market are controllable.

The result has been improving investor sentiment toward property developers. A gauge of real estate companies in Hong Kong has climbed 3.7% this week. Sunac China Holdings Ltd. jumped 9% on Friday, taking its weekly gain to 24%, while China Resources Land Ltd. gained 6%.

It appears that Chinese authorities are “behind all this to make sure that we can avoid a spillover into the broader economy and also outside of China,” Hans Goetti, founder and chief executive officer of HG Research, said on Bloomberg TV. “This sends a signal that China is not interested in making this a bigger issue, especially for foreign holders in this case. I think that’s good news.”

Still, without the pressure of a default in the offing Evergrande’s offshore bondholders may have less room to negotiate. A delinquency would have triggered cross-default clauses and given investors holding other bonds the option of accelerating payments on these debts.

“The payment may not necessarily be in favor of bondholders who wish to start acceleration, because now the holders can’t accelerate anything,” said Eric Liu, head of fixed income at Harvest Global Investments. “It is likely Evergrande will keep paying interest until they come up with a plan.”

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