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Stocks and Bonds Jump Amid Asset-Sale Talk: Evergrande Update

Agile to Exit Joint Venture for $290 Million: Evergrande Update

China’s efforts to spur asset sales by cash-strapped property developers are starting to gain momentum with a flurry of deals, potentially easing the industry’s debt crisis. 

Shares and bonds in property companies rose, with China Evergrande Group’s stock briefly jumping the most in 10 weeks after signs of progress in its restructuring and the appointment of an official from a state-owned distressed-debt manager to its board. The company, which faces coupon payment deadlines totaling $352.5 million on Monday, urged offshore bondholders not to adopt aggressive legal action over repayments.

Agile Group Holdings Ltd. has agreed to sell its 26.7% stake in a Guangzhou property joint venture for 1.84 billion yuan ($291 million), the latest sign that asset sales to state-owned firms may help ease the industry’s liquidity crisis. Fellow builder Yuzhou Group Holdings Co. said it won’t pay off two dollar bonds due this week, meaning some events of default will occur.

Stocks and Bonds Jump Amid Asset-Sale Talk: Evergrande Update

Key Developments:

Evergrande Seeks More Time From Offshore Investors (7:53 p.m. HK)

China’s Evergrande Group urged offshore bondholders not to adopt aggressive legal action over repayments, after an ad-hoc group of its overseas creditors threatened to take enforcement measures.

The developer is seeking more time from overseas investors to fully consider uncertainties and risks in order to make a debt risk disposal plan that will protect the interests of various parties, the company said in a statement. Evergrande is drafting a detailed and effective debt restructuring plan and is actively maintaining dialogue with offshore creditors, it said.

China Huarong Completes Redemption of $1.5 Billion Securities (5:52 H.K.)

China Huarong International said it completed the redemption of $1.5 billion of unsubordinated guaranteed perpetual securities in full, according to an exchange filing.

There are no outstanding securities in issue.

Shenzhen Investment Sees Loss After Hengda Value Drop (5:20 p.m. HK)

Shenzhen Investment expects to report a 2021 consolidated full-year net loss of about HK$3 billion due to the significant drop in fair value of its equity interest in Hengda Real Estate as of end-December, according to a HKEX filing.

The company had a consolidated profit of about HK$3.7 billion in 2020.

Fitch Lifts Default Rating of Guangzhou R&F to ‘CC’ After Exchange Offer (3:26 p.m. HK)

Fitch Ratings moved the long-term foreign-currency issuer default rating of Guangzhou R&F Properties Co. and subsidiary R&F Properties (HK) Co. to ‘CC’ from restricted default

The change follows what the credit assessor had called a distressed debt exchange, before which Fitch had Guangzhou R&F rated at B-. It said Monday the builder continues to face liquidity challenges as a large amount of short-term debt is maturing in 2022, while access to funding could remain limited.

Evergrande May Speed Debt Deal With Cinda on Board, BI Says (1:46 p.m. HK)

Evergrande may speed up its debt negotiations with offshore bondholders after appointing the chairman of state-owned distressed-debt manager Cinda’s Hong Kong unit to its board, Bloomberg Intelligence analysts Daniel Fan and Hui Yen Tay wrote in a note.

“The appointment may be in response to advisers of an ad-hoc group of the bondholders complaining last week of a lack of progress in the talks,” they said. 

Shimao in Talks to Sell Guangzhou Project Stake to SOE: Cailian (12:25 p.m. HK)

Shimao Group Holdings Ltd. is in discussions with state-owned firm China Overseas Land & Investment Ltd. to sell its stake in the Guangzhou Asian Games City project, Cailian reported, citing unidentified people.

China Property M&A Deals Gain Momentum in Relief for Developers (11:43 a.m. HK)

China’s efforts to spur asset sales by property developers in need of cash are starting to gain momentum with a flurry of deals, potentially easing the industry’s debt crisis. 

In recent days, stressed property firms Agile and Shimao have announced sales of stakes in companies to state-owned enterprises to raise cash. Regional lender Shanghai Pudong Development Bank Co. priced a bond to help fund loans for mergers and acquisitions in the sector, and at least two state-owned developers announced plans to issue such M&A notes. 

China Developers’ Dollar Bonds, Shares Extend Last Week’s Gains (10:43 a.m. HK)

Dollar bonds and stocks by Chinese property developers rallied, with the sector boosted by news of asset sales and signs of improved access to funding.

A Bloomberg Intelligence gauge of developer shares gained as much as 2.1% to the highest level since Nov. 12. Chinese high-yield dollar bonds, which are dominated by builders, rose 0.5-2 cents on the dollar, credit traders said, following a week of huge swings.

Pudong Bank Prices 30b Yuan Bond Partly for Property M&A Loans (9:52 a.m. HK)

Shanghai Pudong Development Bank priced a 30 billion yuan 3-year bond at 2.69%, with part of proceeds to be used for funding mergers and acquisitions in the property industry.

The two-part bond’s 5 billion yuan tranche, which will be used to grant loans for such transactions by developers, was 1.79 times subscribed, people familiar with the matter said.

China Evergrande Shares Jump on Progress Signs (9:50 a.m. HK)

Shares climbed in Hong Kong after its dollar bonds jumped late Friday. REDD reported that the Guangdong government plans to release a debt restructuring framework by March. Guangdong’s local government proposes to restructure Evergrande’s debt out of court and plans to separate the offshore debt and assets from the company’s onshore overhaul, according to the report. 

“We view this development positively as it provides some guidance on likely recovery values,” said Charles Macgregor, head of Asia at Lucror Analytics. He added that offshore investors may expect to receive 20-25 cents on the dollar.

China Builder to Miss Dollar Bond Payments After Debt Exchange (9:05 a.m. HK)

Yuzhou won’t pay off two dollar bonds due this week which have $104.9 million of combined principal outstanding following a debt exchange last week. 

It plans to relaunch the exchange offer this week and said the nonpayments won’t trigger events of defaults on its other dollar notes.

China Builder Agile to Sell $291 Million JV Stake to State Firm (8:15 a.m. HK)

Agile will sell its 26.7% stake in Guangzhou Lihe Real Estate Development, a property joint venture, for 1.84 billion yuan, it said in a Hong Kong stock exchange filing. Purchaser is Guangdong Zhonghai Property, an indirect wholly-owned unit of China Overseas Land & Investment.

Agile expects to record a gain of around 698.7 million yuan from the sale, and the net proceeds are planned to go toward general working capital and future business development.

Vanke Overseas to Raise Net 56 Million Pounds From London Property Sale (7:07 a.m. HK)

An indirect subsidiary of Vanke Overseas entered into an agreement to sell a property in London to M&G TS Ryder, according to a Hong Kong stock exchange filing.

China Vanke Co. may focus more on expansion in China after the deal, Bloomberg Intelligence senior credit analyst Daniel Fan said in a note. “This might make sense as it’s financially stronger than many Chinese developers and thus more able to buy cheap assets in the downcycle,” he said.

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