Agile Cut Further as DaFa Flags Non-Payment: Evergrande Update
DaFa Properties, another developer, said it hadn’t paid out on its remaining dollar bonds maturing Tuesday.
(Bloomberg) -- Agile Group was downgraded further into junk territory by S&P Global Ratings and Moody’s Corp. as it faces sizable near-term debt maturities with limited refinancing options.
DaFa Properties, another developer, said it hadn’t paid out on its remaining dollar bonds maturing Tuesday, a potential event of default, though most of the notes were tendered for a debt exchange that completed earlier.
Financial contagion is roaring back in China’s real-estate industry, putting renewed pressure on Xi Jinping’s government to do more to insulate stronger developers. Shanghai Pudong Development Bank Co. plans to sell bonds worth 30 billion yuan ($4.7 billion) to fund loans for property acquisitions, in a move aimed at easing stress in the struggling sector.
In a scheduled press briefing Tuesday, People’s Bank of China officials said property sales and financing were returning to normal, while mortgage loans would be kept “basically stable.” Dollar bonds of some higher-rated developers rebounded after the previous day’s turmoil. Country Garden Holdings Co. notes gained after a record selloff, as the builder also disclosed $10 million of repurchases. A Logan Group Co. dollar bond also rose.
Key Developments:
- China’s Spreading Property Debt Crisis Pressures Xi to Ease
- Chinese Builder Agile Group Downgraded on Liquidity Concerns
- Property Sector Contraction in China Worsens in Blow to Economy
- China Developers Rise on Pudong Bank’s Plans to Fund M&A Loans
- DaFa Properties Hasn’t Paid Off Rest of Maturing Dollar Bond (1)
- Country Garden Dollar Bonds Jump After Monday’s Record Selloff
Agile Group Downgraded to B1 by Moody’s (6:43 p.m. HK)
Agile Group’s long-term corporate family rating was downgraded by Moody’s to B1 from Ba2, while the outlook remains negative. Moody’s said the move reflects Agile’s “increased refinancing risk due to its sizable debt maturities over the next 6-12 months and constrained funding access, which is unlikely to recover in the near term.”
The downgrade by Moody’s follows S&P’s rating cut earlier Tuesday.
Fitch Downgrades Shinsun to ‘CC’ on Higher Refinancing Risks (6:23 p.m. HK)
Fitch Ratings downgraded Shinsun Holdings Group’s Long-Term Foreign-Currency Issuer Default Rating to CC from B- on “heightening refinancing risks of its near-term U.S. dollar bond maturities,” according to a statement.
The downgrade reflects “high level of credit risk,” given insufficient cash to meet capital market maturities over the next five months, particularly the $292 million notes due on Jan. 23, Fitch said.
DaFa Hasn’t Paid Off Rest of Maturing Dollar Bond (6:03 p.m. HK)
DaFa Properties hasn’t paid the $40.4m of principal and interest due on the outstanding portion of a dollar bond maturing Tuesday, a potential event of default under the note’s offering documents. The Chinese developer last week said that $144.1m of the notes were validly tendered through a proposed debt exchange, and the swap was completed Monday.
DaFa, which also delayed its dividend earlier this month, said that the missed bond payment wouldn’t lead to defaults under three other dollar bonds. The stock market filing didn’t address any potential default under the Jan. 18 bond.
PBOC Says China Property Market Expectation Improving Steadily (4:18 p.m. HK)
Property market expectations have been improving steadily as sales, land purchases and financing gradually return to normal, Zou Lan, head of the PBOC’s financial market department, said at a briefing.
Country Garden Dollar Bonds Extend Gains After Record Selloff (3:45 p.m. HK)
Country Garden dollar bonds extended gains after the previous day’s record declines, with some credit traders highlighting $10 million of bond repurchases. The gains came amid a broader advance for Chinese developers’ securities.
CR Land’s Solid Liquidity Set to Grow Home Sales, Pricing Edge, BI Says (2:21 p.m. HK)
China Resources Land could lift contracted sales slightly in 2022 after defying industry trends to grow sales by 11% last year, Bloomberg Intelligence analyst Patrick Wong wrote in a note.
“Its solid liquidity could sustain homebuyers’ confidence and extend its price advantage despite weak sentiment. Potential relaxation in acquisition-funding policy may also favor its expansion in top-tier cities,” Wong said.
Chinese Builders’ Funding Won’t Meaningfully Improve Soon: Fitch (1:28 p.m. HK)
Movement toward any meaningful recovery in China developers’ operating and funding environments would only occur in the second half of the year, said Adrian Cheng, co-head of China property at Fitch Ratings.
Persistent liquidity pressure is poised to result in more defaults, while recent interest-rate cuts and eased mortgage approval rules “have not been very meaningful,” he said on Tuesday.
China Authorities to Ease Property Policy This Year: Lombard (1:20 p.m. HK)
China’s property industry needs further government support to restore investor confidence in the high yield dollar bond market, and authorities will likely loosen policy this year, said Jean-Louis Nakamura, CIO of Lombard Odier Asia Pacific.
The liquidity crisis means the market has moved beyond the point where investors can discriminate between low and high quality developers, which is worrisome, Nakamura told reporters Tuesday.
China’s Spreading Property Contagion Adds Pressure on Xi to Ease (12:24 p.m. HK)
Renewed signs of financial contagion is putting fresh pressure on the government to do more to protect the stronger developers. While panic seemed to ebb on Tuesday, with bonds and shares paring some of the previous day’s losses, analysts expect the situation to worsen unless Beijing acts to improve the industry’s access to funding.
Chinese Developer Agile Downgraded Further Into Junk at S&P (12:12 p.m. HK)
Agile Group’s long-term rating was downgraded by S&P to B+ from BB-, the second downgrade since November, as it faces sizable near-term debt maturities with “limited” refinancing options.
Agile could manage such maturities with cash generated from sales and asset disposals, but the margin of error on execution is reducing, S&P said. Its outlook remains negative on the back of worsening liquidity over the next 12 months.
Separately, Agile Group said it bought back a further $10 million of its 6.7% senior notes due on March 7.
Country Garden Dollar Bonds Jump After Monday’s Record Selloff (11:56 a.m. HK)
Country Garden’s dollar bonds reversed some of Monday’s record declines with credit traders highlighting $10 million of repurchases by the developer. The gains came amid a broader advance for Chinese developers’ securities. Its 6.5% note due 2024 jumped 4.5 cents on the dollar to 74.9 cents as of 11:48 a.m. in Hong Kong, Bloomberg-compiled prices show.
China Fallout May Impact LGFVs, Metals Sectors: CreditSights (11:01 a.m. HK)
A worsening debt crisis in China’s property industry could hit weaker financial institutions, LGFVs, metals producers or the consumer sector, CreditSights warned in a report.
“The market turmoil so far has been severe but largely confined within the China property sector,” it said. “If the situation deteriorates and widespread numbers of developers capitulate, this could spill over into several other sectors” and many Chinese dollar bonds “would effectively become uninvestable.”
Higher-Rated China Developers’ Climb Following Monday’s Rout (10:12 a.m. HK)
Higher-rated Chinese developers’ dollar bonds rebounded early Tuesday, with some notes on pace for their biggest gains in two months following record price declines a day earlier.
China’s Property Sector Contraction Worsens in Blow to Economy (10:11 a.m. HK)
China’s property industry shrank at a faster pace in the final three months of last year as the housing slump continues to take its toll on the economy.
Output in the real-estate sector shrank 2.9% in the fourth quarter after a 1.6% contraction in the previous three months, the National Bureau of Statistics said -- the first consecutive quarterly decline since 2008.
China Developers Rise on Pudong Bank’s Plans to Fund M&A Loans (9:57 a.m. HK)
Shares of some Chinese real estate developers gained as Shanghai Pudong Development Bank plans to use part of its bond proceeds for property project acquisition loans.
A Bloomberg Intelligence gauge of developers rose as much as 0.8%, snapping a four-day drop, with Shimao Group up 3.7%, Country Garden up 3% and China Evergrande rising 0.6%.
Country Garden Dollar Bonds Jump After Monday’s Record Selloff (9:36 a.m. HK)
Country Garden dollar bonds reversed some of Monday’s record declines with some credit traders highlighting $10 million of repurchases the developer disclosed. Its 6.5% note due 2024 jumped 3.5 cents on the dollar to 73.9 cents as of 9:28 a.m. in Hong Kong, Bloomberg-compiled prices showed.
Pudong Bank to Use Part of Bond Proceeds for Property M&A Loans (8:27 a.m. HK)
Shanghai Pudong Development Bank plans 30 billion yuan sale of three-year financial bonds in the domestic market, with part of the proceeds to be used as property project acquisition loans, according to a statement on Chinabond.com.cn.
The bond is the first from a financial institution to fund loans for property M&A, the China Securities Journal said. The move is aimed at easing stress in the struggling property industry after some state-owned developers proposed bond sale plans to buy property assets.
Bond Losses Pass $82 Billion; May Rise More If China Doesn’t Act (6:06 a.m. HK)
The market capitalization of China property’s offshore bonds has dropped from $151 billion of par value to $69 billion of market value, indicating more than $80 billion in investor losses, Bloomberg Intelligence credit analyst Andrew Chan wrote in a note. This excludes losses from onshore bonds.
If China refrains from aggressively easing property policy, more losses and defaults could be coming, he said. Should a developer with a national footprint run into trouble, home buyers worried that projects may not be completed could end up avoiding purchases from all private property firms.
Logan Group Buys Back 1m Shares Jan. 17 (5:36 a.m. HK)
Logan Group Co. bought back shares for HK$5.5 million ($706,000), paying HK$5.47-HK$5.86 per share, it said in a statement to the Hong Kong stock exchange Monday evening. The company bought 3 million of its shares for HK$17 million on Jan. 14.
Country Garden Buys Back $10m of 2022 and 2026 Notes (5:28 a.m. HK)
Country Garden Holdings Co. bought back an aggregate principal amount of $5 million of its 4.75% notes due July 2022 and $5 million of its 7.25% notes due April 2026, according to a statement to the Hong Kong stock exchange late Monday.
The repurchased notes will be canceled and the company will monitor markets for further bond buying.
©2022 Bloomberg L.P.