China Developer Shares Tumble Most Since 2008: Evergrande Update

(Bloomberg) -- Chinese developer shares dropped the most since the global financial crisis on Tuesday as a rout in the nation’s equity market hit the troubled real-estate sector especially hard.

A Bloomberg Intelligence equity gauge of the nation’s builders sank 9.7%, the sharpest one-day decline since October 2008. Developer bonds also tumbled further, with high-yield dollar notes on pace for a 15th consecutive drop according to a Bloomberg index. On Monday, yields topped 27% for the first time.  

Meanwhile, Logan Group Co.’s key onshore unit is seeking to delay repayments on yuan bonds by 15 months, the latest distressed Chinese builder to attempt to alter debt terms as cash is scarce. 

China’s listed property firms have just over two weeks left to agree with auditors on how much debt they are liable for and whether there’s sufficient cash to pay for it. Annual reports that are due by March 31 will produce the first fully audited statements since the industry’s liquidity crisis spread.

Key Developments:

• Time Is Running Out for China’s Developers to Come Clean on Debt
• Fund Managers Run Away From China Stocks Even With 75% Discount
• China High-Yield USD Bonds Fall 1-2 Cents Alongside Stock Slump
• China Great Wall Asset to Sell 10b Yuan Bonds to Aid Developers
• China Jan.-Feb. Home Sales -22.1% Y/y; Property Investment +3.7%
• Chinese Construction Firms See Rising Bond-Pledging Risks
• China Junk Dollar Bonds Extend Drop as Developers Lead Declines
• China Credit Growth Slows More Than Expected Despite Easing 

Sunac Bonds PLunge After Cut to B- by Fitch (2:05 p.m. London)

Sunac China Holdings Ltd.’s bonds plunged after the builder’s long-term issuer default rating was downgraded by Fitch Ratings to B- from BB-, citing increasing uncertainty about refinancing debt coming due the next few months amid decreasing market confidence and falling contracted sales.

The builder’s “margin of safety is narrowing,” said Fitch. The firm’s 6.65% note due 2024 fell 10.4 cents on the dollar to 13 cents as of 6:10 p.m. in Hong Kong, according to Bloomberg-compiled prices, set for its biggest-ever drop.

China Developer Share Index Drops Most Since 2011 (4:36 p.m. HK)

A Bloomberg Intelligence equity gauge of China’s builders sank 9.7%, the sharpest one-day decline since September 2011. 

That came on a day when the nation’s stocks suffered another deep selloff amid concerns about the country’s ties with Russia and persistent regulatory pressure. The Hang Seng China Enterprises Index dropped 6.6%, capping its worst 2-day run since 2008.

China Junk USD Bonds’ Drop Reaches 3-5 Cents as Stocks Fall (2:22 p.m. HK)

Tuesday declines in Chinese high-yield dollar bonds reached 3-5 cents, credit traders said, as Greater China equity markets also hit session lows to extend their rout. CIFI Holdings Group Co.’s 4.45% bond due 2026 dropped 5 cents to 39.4 cents following prior day’s record 7.4-cent decrease, according to Bloomberg-compiled prices as of 2:12 p.m. in Hong Kong.

Jiayuan International Downgraded to B by Fitch (2:06 p.m. HK)

Jiayuan International Group Ltd.’s long-term issuer default rating was downgraded by Fitch to B from B+, with a negative outlook.

The rating firm cited the Chinese developer’s weaker business profile following continued deterioration in sales and an uncertain recovery.

Logan Seeks to Delay Yuan Bond Repayments (1:42 p.m. HK)

Logan’s key onshore unit is seeking to pay 5% of principal on two yuan bonds due this month and not complete repayment until June 2023, modifying at least one earlier proposal, according to people familiar with the matter. 

The bonds involved are Shenzhen Logan Holding Co.’s 1.51 billion yuan ($237 million) 5.5% note that’s puttable March 19 and a 1.83 billion yuan 4.9% bond due March 22, said the people, who are not authorized to speak publicly and asked not to be identified.

Guangzhou R&F to Sell London Project at Loss (9:45 a.m. HK)

Guangzhou R&F Properties Co. said it agreed to sell its Vauxhall Square property and loan for 95.7 million pounds ($125 million). Far East Consortium International Ltd. is the buyer.

Guangzhou R&F will record a loss of about 68.8 million pounds. It has the option six months after completion to repurchase the project. Should it exercise that option, the estimated incurred loss will be significantly reduced or it may record a gain.

China Great Wall to Sell Bonds to Help Developers (9:31 a.m. HK)

China Great Wall Asset Management Co. said it has gotten approval to sell 10 billion yuan of bonds on the interbank market and it will use the proceeds to help major developers “dispose of risks” and repay debt.

Earnings Season at Hand for Chinese Builders (5:00 a.m. HK)

Previously hidden debts are likely to appear on balance sheets, pushing up measures of leverage, according to analysts at CCB International Securities Ltd. Restrictions on the use of home presale proceeds may reduce freely available cash, while impairments are a risk, the analysts said. 

Transparency and governance concerns have plagued investors in Chinese property firms in the run-up to earnings season. At least four auditors have resigned or been replaced since the start of the year, with global ratings agencies having pulled some assessments of property bonds due to insufficient information.

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