Property Progress, Aoyuan in Asset Sale Talks: Evergrande Update

(Bloomberg) -- China Evergrande Group’s delivery of property projects from July to October may indicate some normalization of working capital and cash flow, Bloomberg Intelligence analysts led by Daniel Fan wrote. 

That may increase the chance of it meeting upcoming bond coupon payments for the year, according to the analysts.

Property shares in China gained after the Shanghai Securities Journal cited an unidentified government agency saying that lending to the real estate sector “basically recovered to normal levels” in October. The CSI 300 Real Estate Index climbed as much as 3.2% while troubled developer Kaisa Group jumped as much as 18%, its steepest advance since September 2017.

Shares in the property management arm of China Aoyuan also jumped as much as 9.7% after REDD reported that the group is in preliminary talks to sell its majority stake in the unit to Hopson Development. The company aims to sell as much as $1 billion in assets to ease liquidity stress. 

Two more Chinese developers are trying to soothe bondholders with early repayment on debt as stress builds in the battered real estate sector and defaults rise to a record. 

For a calendar on bond interest and principal payments due in November, see here. 

Key Developments:

• China Developers Jump on State Media Report Lending Is ‘Normal’
• China High-Grade Developers’ Dollar Bond Spreads Narrow
• Two More Chinese Developers Repay Bonds Early as Yields Spike
• China’s Troubled Developers Struggle to Sell Billions in Assets

China Aoyuan in Talks to Sell Property Unit to Hopson, REDD Reports (5:15 p.m. HK)

China Aoyuan is in preliminary talks to sell a 55% stake in its Hong Kong-listed property management unit to Hopson Development, as it embarks on asset disposals to ease liquidity stress, according to a REDD report. 

The Aoyuan Healthy Life unit rose 9.4% on Wednesday, putting its market value at about HK$2.7 billion ($347 million). 

Hopson, which held unsuccessful talks to buy Evergrande assets last month, is also interested in acquiring Agile’s property management unit A-Living, REDD reported. Shares in that unit climbed as much as 4.1%.

Evergrande’s Project Delivery May Normalize Cash: BI (1:15 p.m. HK)

China Evergrande Group’s delivery of 184 property projects from July to October may indicate some normalization of working capital and cash flow, Bloomberg Intelligence analysts led by Daniel Fan wrote. It delivered over 7,800 units in September and 7,568 units in October.

The developer’s gradual normalization of working capital may increase the chance of it meeting upcoming bond coupon payments for the year, according to the analysts.

China High-Grade Developers’ Dollar Bond Spreads Narrow (12:50 p.m. HK)

Spreads for some Chinese developers’ dollar bonds narrowed Wednesday morning, following the sector’s recent declines alongside junk-rated peers. 

Strength was also seen among some high-yield developers’ dollar notes, with Evergrande and Logan Group Co. among the gainers.

China Developers Jump on State Media Report (11:35 a.m. HK)

Chinese property shares gained after the Shanghai Securities Journal cited an unidentified government agency saying that lending to the real estate sector “basically recovered to normal levels” in October. 

The CSI 300 Real Estate Index climbed as much as 3.2% while troubled developer Kaisa Group jumped as much as 18%, its steepest advance since September 2017.

Two More Chinese Developers Repay Bonds Early as Yields Spike (11 a.m. HK)

Two more Chinese developers are trying to soothe bondholders with early repayment on debt as stress builds in the battered real estate sector and defaults rise to a record. 

Logan offered to repay a $244 million 5.75% dollar bond due Jan. 3 at face value plus accrued interest, according to an exchange filing. Ronshine China Holdings Ltd. said it has spent more than $23 million in the past two weeks repurchasing multiple dollar bonds before maturity after being downgraded by Fitch Ratings Inc.

China’s Real Estate Lending Back to Normal: Securities Journal (8:30 a.m. HK)

China’s lending to the real estate sector “basically recovered to normal” levels in October following slow growth earlier this year, the Shanghai Securities Journal reported, citing an unidentified government agency. Lending scale picked up substantially in October, the newspaper said.

China’s Troubled Developers Struggle to Sell Billions in Assets (8:15 a.m. HK)

Property developers in China looking to raise badly needed cash by selling assets are finding it hard to strike deals as buyers hoard funds after home sales plunged and Beijing stepped up its borrowing crackdown.

Evergrande last month ended discussions to sell a controlling stake in its property-management business that would have raised about $2.6 billion. A plan to unload a trophy office tower in Hong Kong also stumbled, while Modern Land China Co. defaulted on a $250 million bond last week after it was unable to sell some assets, Cailian reported. Oceanwide Holdings Co. is seeking to offload its main office complex in Beijing after a unit defaulted. 

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