China Regulators in Talks With Shimao, Trusts on Loan Extension
China’s financial regulator is coordinating negotiations between Shimao Group Holding and some trust firms for loan extensions.
(Bloomberg) -- China’s financial regulator is coordinating negotiations between Shimao Group Holding Ltd. and some trust firms for loan extensions, according to people familiar with the matter, a sign that authorities want to prevent a cash crunch at the embattled developer.
Officials from the China Banking and Insurance Regulatory Commission helped arrange talks between Shimao and trust firms including Guotong Trust Co. and China Minsheng Trust Co., the people said, asking not to be named discussing a private matter.
It’s unclear what sweeteners Shimao has presented to gain extensions and whether its offer will be accepted. Shimao is also seeking new loans from banks, one of the people said.
Shimao’s shares and bonds tumbled this week as investors grew concerned about the company’s financial health. A transaction between two of its units was taken as a sign by some analysts that the developer was shifting money from stronger to weaker parts of the business. Shimao has blamed the selloff on unspecified “rumors,” but its sparse public comments added to concerns that it faces liquidity stress.
In a sign of official concern about contagion risk from the recent selloff, Shanghai authorities held two closed-door meetings recently with developers under their oversight, the 21st Century Business Herald reported without specifying the source. The officials demanded the companies make contingency plans for risk prevention and asked them to disclose details of their borrowings.
Officials from the Shanghai branch of the People’s Bank of China and CBIRC asked companies facing liquidity difficulties not to default on their debt obligations, a person familiar with the discussion said. They showed a willingness to coordinate with local financial institutions on loan extensions, the person said.
The CBIRC’s Shanghai Branch didn’t immediately respond to a request for comment. A representative for Shimao declined to comment. Calls to Guotong Trust and Minsheng Trust weren’t answered after regular business hours.
Shimao’s shares rebounded on Thursday after a four-day 35% rout, rising 4% in their biggest jump in two weeks. Shimao’s dollar bond due 2022 rose 0.3 cents on the dollar to 58.9 cents, after falling nearly 30 cents earlier this week, according to Bloomberg-compiled prices as of 5:40 p.m. local time.
©2021 Bloomberg L.P.
With assistance from Bloomberg