More Chinese developers seek to extend bond terms to avoid default

HONG KONG/SHANGHAI, Jan 13 (Reuters) – Cash-strapped Chinese promoters are scrambling to negotiate new terms with their bondholders to avoid defaults. Shimao Group (0813.HK) and Yuzhou Group (1628.HK) are the latest to seek extensions on their maturing debt.

The market is also watching the outcome of China Evergrande Group’s (3333.HK) meeting with onshore bondholders as the voting period to approve an extension ends on Thursday.

The company has so far honored payments on onshore bonds although it has defaulted on some offshore bonds.

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Struggling with more than $300 billion in debt, the world’s most indebted real estate company is asking for a six-month extension to repayment and coupon payments on a 4.5 billion yuan ($157 million) bond ). Read more

Chinese developers are facing an unprecedented cash crunch due to years of regulatory restrictions on borrowing, leading to a series of offshore debt defaults, credit rating downgrades and share sales and developer obligations.

The World Bank’s economic outlook report said earlier this week that a severe and prolonged downturn in China’s property sector would have significant repercussions for the broader economy, as the combined onshore and offshore liabilities of its developers amount to nearly 30% of the country’s GDP.

He warned of the risks and potential contagion costs of heavy deleveraging by major Chinese property companies.

Shanghai-based Shimao will hold online meetings with creditors of two asset-backed securities (ABS) on Jan. 17 to vote on proposed payment extensions, according to documents seen by Reuters on Thursday.

The two onshore ABS products – worth a total of 1.17 billion yuan ($183.91 million) – will mature later this month, and Shimao is seeking to extend payment terms until the end of 2022 while making some milestone payments before the new deadline, according to the documents, and confirmed by sources.

Shimao said last week that it had missed payment on a $101 million trust loan. more Rating agency S&P, which downgraded the rating to “B-” again this week, said Thursday it had withdrawn the rating at the company’s request.

Yuzhou, founded in the eastern coastal city of Xiamen, also announced an exchange offer for two of its 2022 dollar bonds due later this month – worth a total of $582 million – to extend one-year maturities to avoid default. Read more

It expects a delay in coupon payments totaling $110 million that are due in January and February, Yuzhou said in a filing. It is also seeking consent from the holders of all its other $4.5 billion bonds to change terms that would help it avoid cross-defaults if other bondholders request repayment.

MORE MAY COME

Nomura believes the industry’s cash crunch could intensify, with companies facing onshore and offshore maturities totaling around 210 billion yuan each in the first and second quarters, up from 191 billion yuan in the fourth quarter of 2021.

Developers are also desperately raising funds to pay off debt.

Major player Sunac China Holdings Ltd (1918.HK) said on Thursday it would raise $580.1 million through a share sale. Read more

A source close to Sunac told Reuters that the company had no other near-term plans to place its shares or shares in the Sunac Services (1516.HK) unit to raise capital, adding that it had sufficient funds to meet short-term debt payment obligations. term and for the development of the project.

Media reported on Wednesday, citing company records, that shares worth 110 million yuan in a few companies owned by Sunac have been frozen by a court in Shenzhen.

Responding to the reports, Sunac said the freeze was caused by a “minor dispute” between the company and its partners, but the parties reached a reconciliation and decided to unfreeze the shares.

Separately, the smaller developer Agile Group (3383.HK) pledged 65.6 million shares of its property management unit, A-Living Smart City Services, on Jan. 6 for an unspecified amount, according to a report. stock market record.

Shares of Chinese developers generally closed on Thursday, with Sunac and Agile falling 22.6% and 13.3% respectively. Shimao fell 9.4% while Yuzhou lost 6.9%. Evergrande fell 3.6%.

One of Yuzhou’s yuan-denominated bonds fell 21.8% in the morning before it was ordered to temporarily halt trading.

Two Shanghai-traded bonds of Shanghai Shimao (600823.SS) were also suspended, but after jumping more than 30%.

($1 = 6.3610 Chinese Yuan)

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Reporting by Clare Jim in Hong Kong, Jason Xue, Samuel Shen and Andrew Galbraith in Shanghai; Editing by Jacqueline Wong, Elaine Hardcastle

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