One More Developer Seeks to Extend Debt Due: Evergrande Update

(Bloomberg) -- Another Chinese real-estate company is seeking a debt extension to avoid a payment failure as shockwaves from a credit crunch continue to reverberate through the country’s property sector. 

Guangzhou R&F Properties Co. is asking holders of a $725 million dollar note maturing Jan. 13 to extend the due date by six months, and is offering to buy back some of the debt at a discount. If the proposals aren’t backed, the company said it might not be able to fully pay off the note. The news comes as Shimao Group Holdings Ltd.’s dollar bonds sank to all-time lows despite assurances from a unit of the firm that business activities were normal. 

Chinese growth slowed further in November as a worsening real-estate market slump and Covid disruptions weighed on the world’s second-largest economy. The data highlight the scale of the challenge facing the Chinese government in stabilizing the economy amid property woes. Shimao fears may finally prompt the state to take action to rescue the sector, Bloomberg Intelligence Andrew Chan wrote in a report.

Key Developments:

• Chinese Builder Guangzhou R&F Asks for Dollar-Bond Extension
• China’s Property-Led Economic Slump Fuels Calls for Stimulus
• Why Hidden Debt Is a Big Problem for China Developers: QuickTake
• Hong Kong’s Property Tycoons Sacrifice Profit to Appease Beijing
• China Developers Sink as Shimao Deal Stokes Governance Concern

China Property Tightening May Have Peaked, Norea Asset Says (5:17 p.m. HK)

It’s highly likely that China’s policy tightening on the property sector has peaked for now, given signals from the Politburo meeting and a reserve-requirement ratio cut, Paula Chan, a fund manager with Nordea Asset Management said in interview. 

A property tax roll-out is still at a preliminary stage, and the initial tax rate is expected to be low, hence it may not be a key detractor, she said.   

Kaisa Offshore Bondholders Aim to Buy Onshore Bad Loans: Reuters (4:28 pm HK)

A group of offshore holders has agreed to set aside as much as $1 billion to acquire bad loans from Kaisa’s onshore creditors, Reuters reports, citing two people familiar with the matter.

Crash in Shimao Bonds Stokes Contagion Fear (3:20 pm HK)

Shimao Group, founded by billionaire Hui Wing Mau, is still rated investment grade by Fitch Ratings, though S&P Global Ratings lowered their rating of the firm to junk last month. Many of Shimao Group’s bonds are held by investors who have much lower tolerance for defaults than those who dabble in names like Evergrande.

Shimao Group’s note due 2024 fell 5.9 cents on the dollar to 53.7 cents on Wednesday, after tumbling 12.5 cents a day earlier, according to Bloomberg-compiled prices. Its shares fell 2.5% at the close, and are down 35% over the last four trading sessions.

Guangzhou R&F Proposes Bond Extension to Avoid Payment Miss (3:20 p.m. HK)

Guangzhou R&F has emerged as the latest Chinese developer trying to avoid a payment failure. The company’s Easy Tactic unit is asking holders of the note due next month for the extension, according to a Singapore stock exchange filing. It’s also offering to repurchase some of the bond at a 17% discount to face value. 

The bond traded below 85 cents on the dollar for much of the past three months and fell 4.1 cents to 74.4 cents after the proposal was announced. Other dollar notes declined more than 2 cents, while an onshore bond maturing in April 2022 recovered some ground after plunging 26%. The company’s shares dropped 3% in Hong Kong, closing at their lowest since 2008 and putting this year’s plunge at 64%. 

China’s Economy Slows in November as Property Slump Deepens (10:03 a.m. HK)

Industrial output rose 3.8% from a year earlier, quickening from 3.5% in October and above 3.7% projected by economists. Retail sales growth weakened to 3.9%, missing economists’ forecasts of a 4.7% gain. 

Growth in fixed-asset investment eased to 5.2% in the first eleven months of the year. Property investment grew by 6% in the same period, slowing from 7.2% during the January-October period, as financing rules remained strict and home sales plunged amid weak sentiment. 

Chinese Developer Sunac’s Dollar Bonds Continue to Fall (9:48 a.m. HK)

Sunac China Holdings Ltd.’s dollar notes extended their declines, with some sliding 2 cents on the dollar, according to credit traders. The firm’s 7.95% 2022 note dropped 0.7 cents to 77.9 cents, Bloomberg-compiled data show. 

China Home Market Slump Deepens as Prices Fall for Third Month (9:30 a.m. HK)

China’s home prices fell for a third consecutive month in November, adding to a property industry slump that’s hurting the economy.

New-home prices in 70 cities, excluding state-subsidized housing, declined 0.33% last month from October when they fell 0.25%, National Bureau of Statistics figures showed Wednesday. Values in the secondary market slid 0.37%, down for a fourth month. 

Shimao Unit Says Business as Usual, Has Ability to Repay Debt (9:14 a.m. HK)

A unit of Shimao said its business activities are normal and there’s no event that would affect its ability to repay its bond principal and interest.

The statement from Shanghai Shimao Co. on Tuesday evening came as the Shanghai stock exchange asked the firm to “prudently assess” the impact of related debt given recent attention on borrowings of the listed company and its controlling shareholder. The bourse also asked Shanghai Shimao to justify a planned sale of real estate management assets to Shimao Services Holdings Ltd. and explain whether the deal would hurt smaller shareholders. 

Banks in China Boomtown Cut Mortgage Rates Amid Property Crisis (8:24 a.m. HK)

Banks in the southern town of Shenzhen have cut mortgage rates, following government calls to ease property curbs amid the widening debt crisis for developers. Some lenders in the nation’s least affordable residential market lowered first-home mortgage rates to 4.95% from 5.1%, state broadcaster CCTV reported, citing local real-estate agents. Mortgage rates for second homes in the city were reduced to 5.25% from 5.6%.

Evergrande Asked to Halt Assets Disposal for More Facts: Caixin (6:50 a.m. HK)

China Evergrande Group’s units have been asked to halt asset disposals by a working team sent to the developer’s headquarters in Guangzhou as it assesses the true picture of Evergrande’s assets and liabilities, Caixin Magazine reported, citing an unidentified person from Evergrande. 

Why Hidden Debt Is a Big Problem for China Developers: QuickTake (5 a.m. HK)

Turmoil in China’s junk bond market has been testing investors’ nerves -- and that’s just concerning the debt they knew about. It turns out that property developers including Evergrande, Kaisa Group Holdings Ltd., Fantasia Holdings Group and Agile Group Holdings also have lots of opaque liabilities that may or may not be reflected on their balance sheets, making it hard to assess the companies’ true credit risks. 

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