Shimao Defaults on Trust Loan, R&F Bonds Sink: Evergrande Update

(Bloomberg) -- A unit of Shimao Group Holdings Ltd. defaulted on a yuan loan after a demand for early repayment, according to a notice sent to investors by the trust company involved and seen by Bloomberg.

China Credit Trust Co. said a unit of the defaulter has 645 million yuan ($101 million) of overdue payment on a trust product, and that it’s seeking early repayment after Shimao failed to meet installment requirements, according to the notice. 

Dollar bonds from Shimao -- which builds residential, hotel, office and commercial properties and is among the largest debt issuers in China’s real estate sector -- slid by a record.

Separately, Guangzhou R&F Properties Co.’s bonds slumped after the developer warned it’s struggling to find sufficient funds to partially repay a note maturing next week. R&F said cash earmarked for a partial repayment offer may be materially less than the expected $300 million because of delays to some planned asset sales. “The Group is continuing to take active measures to shore up its liquidity position,” it said in an exchange filing. 

R&F’s 5.875% dollar note due 2023 fell 7.4 cents to 29.5 cents, according to Bloomberg-compiled data, set for its largest drop in five weeks. Debt from some peers including Zhenro Properties Group Ltd. dropped by the most since November. 

Key Developments:

• Shimao Pledges 265m Shares of Shanghai-Listed Unit for Loans
• China Credit Trust Says Shimao Unit Defaulted on 645M Yuan Loan
• Developers Lead Fresh Declines in China High Yield Dollar Bonds
• China Seen Delaying Property Tax Trials Until Market Improves
• Guangzhou R&F’s Bonds Plunge on Cash Worries as Deadline Looms
• Evergrande’s Condemned Towers on China’s Hawaii Show Threat
• Guangzhou R&F Sees Funds for Tender Offer Settlement Below $300m
• Hard Landing in Property Market Would Crater China’s Economy

Shimao unit defaults on trust loan (4:24 p.m. HK)

China Credit Trust raised funds for Shimao by selling a high-yielding investment product to investors. It also oversees payments from the borrower. China Credit Trust and Shimao did not immediately respond to Bloomberg requests for comment.

Developers’ dollar bonds drop (3:22 p.m. HK)

Chinese junk-rated dollar bonds fell as much as 2 cents on the dollar on Thursday, with developers continuing to lead this week’s declines, according to credit traders.

Yuzhou Group Holding Co.’s bonds fell further, following REDD’s report that the developer has held talks with advisers about a possible debt swap and a deal of as much as 1.06 billion yuan to sell a property management business.

Property tax trials may be delayed, analysts predict (1:30 p.m. HK)

Analysts expect the government will hold off on expanding trials of a property tax. “Now may not be an appropriate time to launch the trials as the economy and the real-estate market are both under pressure,” said Liu Jianwen, a Peking University professor who is also the legal adviser to the Finance Ministry and legislative adviser to the standing committee of the National People’s Congress. 

Huarong shares extend drop (11:52 a.m. HK)

Huarong shares sink as much as 25%, extending Wednesday’s 50% tumble to a record low after trading resumed for the first time in nine months.

R&F dollar bonds slump (10:59 a.m. HK)

The fresh worry following Guangzhou R&F’s statement Wednesday follows the company’s emergence last month as among the builders attempting to avoid bond default. 

Its Easy Tactic unit proposed a six-month extension of the $725 million note maturing Jan. 13 and repayment options including holders getting 83 cents on the dollar. It subsequently said it planned to put about $300 million in escrow to help fund the bond repurchase through its tender offer, before saying Wednesday the amount could be “materially less.”

Zhenro granted credit line from Bank of China (7:41 a.m. HK)

A Zhenro unit was recently granted a credit line of 9.14 billion yuan by Bank of China Ltd., according to an exchange filing. Credit lines from China’s four largest lenders total almost 24 billion yuan, which Zhenro said shows full confidence in its solvency.

©2022 Bloomberg L.P.