More Chinese developers are looking to extend bond terms to avoid default By Reuters

HONG KONG / SHANGHAI (Reuters) – China’s low-income developers are working to negotiate new terms with their bondholders to avoid defaults, with Shimao Group and Yuzhou Group looking for the latest extensions to their debt.

The market is also seeing the outcome of the China Evergrande Group’s meeting with land bondholders as the voting period to approve the extension ends on Thursday. The company has so far fulfilled its land bond payments, although it has prioritized some offshore bonds.

Struggling with more than $ 300 billion in liabilities, the world’s most indebted real estate company is demanding a six-month delay in the amortization of a 4.5 billion yuan ($ 157 billion) bond and the payment of coupons.

Chinese developers are facing unprecedented tight liquidity as a result of years of regulatory lending cuts, leading to offshore debt defaults, lower credit ratings and sales of developer shares and bonds.

The World Bank’s economic forecast report earlier this week said that a severe and protracted downturn in China’s real estate sector would have a profound impact on the economy as its combined land and sea liabilities accounted for nearly 30% of the country’s GDP.

He warned of the dangers and potential costs of pollution caused by the sharp deleveraging of large Chinese property companies.

Shanghai-based Shimao will hold online meetings with creditors on two assets-backed securities (ABS) on January 17 to vote on proposals to extend the payment, according to documents obtained by Reuters on Thursday.

Dry ABS products, valued at a total of 1.17 billion yuan ($ 183.91 million), are due to end this month, and Shimao plans to extend the payment period until the end of 2022 while making payments in stages before the new deadline, according to documents and sources.

Yuzhou, set up in the east coast city of Xiamen, also announced a two-year offer of 2022 dollar bonds at the end of the month – a total of $ 582 million – to extend the maturity by one year to prevent a restoration.

Yuzhou said in a filing that it expects a delay in payment of $ 110 million in coupons in January and February. It is also seeking the permission of its holders of all other $ 4.5 billion bonds to change the terms that would help it avoid cross-defaults if other bondholders demand a refund.

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Nomura estimates that the sector’s monetary cuts could be exacerbated by companies that have to meet land and sea maturities in the first and second quarters of about 210 billion yuan, more than 191 billion yuan in the fourth quarter of 2021.

Developers are also raising funds to pay off debt.

Major player Sunac China Holdings Ltd said on Thursday that it would raise $ 580.1 million from the sale of the shares.

The media reported on Wednesday that citing company records, Sunac had frozen 110 million yuan shares of some of the companies owned by Sunac in Shenzhen court.

In response to the reports, Sunac said the freeze was caused by a “small dispute” between the company and its partners, but the parties have reached a reconciliation and are deciding to defrost the shares.

In addition, the smaller developer Agile Group committed 65.6 million shares of its property management unit, A-Living Smart City Services, in exchange for an unspecified amount on January 6, according to stock exchange records.

Shares of Chinese developers generally fell on Thursday, with Sunac and Agile falling 19% and 12%, respectively, in the early afternoon. Shimao fell 7.6% and Yuzhou fell 7%. Evergrand fell 3%.

One of Yuzhou’s yuan-denominated bonds fell 21.8% in the morning before the order to stop trading temporarily.

Two Shanghai Shimao bonds traded in Shanghai were also temporarily suspended, but after rising by more than 30%.

($ 1 = 6.3610)