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Evergrande scrambles to avoid new flaw, Shimao hoists “for sale” sign

The China Evergrande Group logo is seen at the real estate developer’s headquarters in Shenzhen, Guangdong Province, China on September 26, 2021. REUTERS / Aly Song

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  • Shimao puts assets on the pad, ratings have been further reduced
  • Evergrande extends the deadline for postponing payment of obligations
  • R&F next on the agenda with a $ 750 million debt payment on Thursday

HONG KONG / LONDON, Jan. 10 (Reuters) – China’s real estate industry saw more drama on Monday after reports on Shimao – rated investment grade until a few months ago – put all of its projects up for sale, and Evergrande tried to avoid another top -profile by default.

Other nasty surprises this month have meant no relaxation in the Chinese real estate crisis that swept over $ 1 trillion from the industry last year.

Monday’s twists saw the Shimao Group’s credit rating down again by S&P and Moody’s after unexpectedly defaulting on a “fiat loan” last week, though its shares jumped nearly 20% (0813 .HK) on reports that he was in talks about selling assets with the state. -supported by giant China Vanke. Read more

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China Evergrande (3333.HK), the world’s most indebted developer that sparked the crisis last year, said it left its Shenzhen headquarters to cut costs. Read more

The company kept a glimmer of hope that its first default on the “onshore” Chinese yuan could be further averted by extending the deadline until Thursday for bondholders to agree to a payment deferral of 4, 5 billion yuan ($ 157 million) six months. Read more

Chinese real estate companies have come under unprecedented pressure in the past six months as a result of Beijing’s efforts to tackle debt overhang in the industry.

Reuters reported last week that the government now plans to make it easier for state-backed property developers to buy the assets of struggling private rivals. Read more

But the sector’s liquidity shortage is also set to intensify, with companies expected to make nearly $ 40 billion in international bond payments over the next six months according to brokerage firm Nomura, including nearly $ 1.5 billion. dollars this week only.

One of those likely to be highlighted alongside Evergrande on Thursday will be Guangzhou R&F Properties (2777.HK). Its bonds collapsed to deeply distressed levels ahead of a $ 750 million bond payment due that day. It also has a number of unfinished megaprojects in global cities like London.

“I think the worst may be yet to come,” said Himanshu Porwal, emerging market corporate credit analyst at Seaport Global.

“A lot will depend on what the Chinese government does in terms of liquidity measures … But it’s been four months already so I don’t know what they would expect.”

Chinese high yield crushed by collapse in real estate

NEW LOW

The woes of the past few days have seen the homebuilder-dominated ICE China High Yield Debt Index (.MERACYC) hit an all-time low, while Evergrande and his defaulting colleague Kaisa have saw their bonds ejected from emerging markets closely followed by JP Morgan. corporate debt market index.

S&P and Moody’s both downgraded Shimao’s rating deeper into the garbage category on Monday and warned of the potential for further downgrade.

S&P, which rated Shimao investment grade last November, cut it two notches. He said: “The decline is worse than expected. We now believe the company’s liquidity is low.”

Moody’s and Fitch also downgraded the Yuzhou Group (1628.HK) due to increased refinancing risk while Moody’s withdrew the rating of another company, Yango, due to “insufficient information”.

Separately, small developer Modern Land (1107.HK), which missed payment on its 12.85% banknotes due in October, said in a document on Monday that it had received notices from some noteholders demanding the early redemption of their senior notes.

The developer said he was discussing a waiver with these creditors and had appointed financial advisers to formulate a plan. It is also in talks on a $ 1.3 billion restructuring plan for its offshore bonds, the company added.

Shares of Modern Land, which resumed trading after being suspended on Oct.21, fell 40% in Hong Kong to HK $ 0.23.

“This will be the peak of the payback period and we will see more developers default,” said Kington Lin, managing director of the asset management department at Canfield Securities Limited.

“The market is looking at how many SOEs (state-owned enterprises) will get more M&A loans to help struggling developers.”

Chinese real estate companies face big bills

(This story is passed on to add a deleted letter in the first paragraph)

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Reporting by Clare Jim and Donny Kwok in Hong Kong, Samuel Shen in Shanghai and Marc Jones in London; ; Editing by Kim Coghill, Shri Navaratnam, Tomasz Janowski and Cynthia Osterman

Our Standards: Thomson Reuters Trust Principles.