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China Property Firms Face Raft of Key Payments This Week

China Property Firms Face Raft of Key Payments This Week

Investors are bracing for a fresh wave of volatility in China’s credit markets this week, as a barrage of payment deadlines loom for some of the property sector’s most distressed firms.  

China Evergrande Group is seeking to avoid its first default on an onshore bond when holders vote on whether to allow the firm to defer payment Thursday. Meanwhile, Shimao Group Holdings Ltd. -- which was rated investment grade only two months ago -- and one of its onshore units also need to service some $376 million in upcoming bond payments this week. 

The credit crunch in China’s property sector drove defaults to a record last year, sending stress levels in the overseas credit market to the highest possible reading in Bloomberg’s China credit tracker in December. That’s likely to continue, as builders faced at least $197 billion in maturing bonds, coupons, trust products and deferred wages to millions of migrant workers at the start of the month.  

Offshore bondholders are already feeling some pain this week after Guangzhou R&F Properties Co. repurchased just 16% of outstanding notes in a tender and consent solicitation that Fitch Ratings labeled a “distressed exchange.” The firm initially said it expected to set aside $300 million for a deal, before announcing that it had “materially less.” 

A selloff in Chinese high-yield dollar bonds, dominated by property notes, is set to continue for an eighth day. The notes fell 0.5 cent to 2 cents on the dollar Wednesday morning, according to credit traders. 

China Property Firms Face Raft of Key Payments This Week

Companies are expected to keep up a record pace of payment failures this year, even as authorities call on banks to boost real estate lending in the first quarter and ease a key debt restriction for developers. Prohibitively high borrowing costs in the offshore market have effectively frozen many builders out of the offshore bond market, making it difficult to roll over that debt. 

Shimao 

Shimao Group, which builds residential, hotel, office and commercial properties, faces a series of coupon payments this week. It has a $6.9 million dollar bond coupon due Thursday. Its onshore subsidiary Shanghai Shimao Co. has set aside funds to repay a 4.65% local bond maturing Saturday with an outstanding principal of 1.9 billion yuan ($300 million), according to people familiar with the matter. 

Until recently, Shimao Group was considered one of the industry’s healthier players. Last week it suffered a bond rout after a creditor said one of the developer’s units defaulted on a local loan. Any failure at the firm could pose a bigger risk to credit markets than the crisis at Evergrande, according to some investors. 

Evergrande

Evergrande is looking to avert its first possible default on a local bond by winning sufficient support from creditors to delay repayment. The firm has already extended the voting deadline to Thursday.

The property giant’s onshore unit Hengda Real Estate needs the majority of bondholders to approve its proposal to postpone the deadline on a 4.5 billion yuan bond from Jan 8. to six months later. Holders previously demanded early repayment on the note which matures 2023.

The firm was labeled a defaulter for the first time in early December as it missed making payments on dollar bonds. A seven-member risk management committee was established at that time to “actively engage” with creditors.

China Property Firms Face Raft of Key Payments This Week

Key payments due Jan. 8 to 16

  • Logan $9.56 million coupon on note due 2025, first deadline Jan. 12
  • Shimao $6.9 million coupon on note due 2030 first deadline Jan. 13
  • Greentown $8.48 million coupon on note due 2025, first deadline Jan. 13
  • Greentown 98 million yuan coupon on note due 2026, first deadline Jan. 13
  • Logan $6.75 million coupon on note due 2028, first deadline Jan. 13
  • Redsun $12.8 million coupon on note due 2025, first deadline Jan. 13
  • Seazen Group $6.68 million coupon on note due 2025, first deadline Jan. 13
  • KWG $11.1 million coupon on note due 2027, first deadline Jan. 13
  • Yuzhou $23.8 million coupon on note due 2026, first deadline Jan. 13
  • Yuzhou $17.8 million coupon on note due 2027, first deadline Jan. 13
  • Central China $9.75 million coupon on note due 2025, first deadline Jan. 14
  • Logan $8.63 million coupon on note due 2025, first deadline Jan. 14
  • Times China $10.1 million coupon on note due 2027, first deadline Jan. 14
  • Shanghai Shimao 2 billion yuan maturity, 93 million yuan coupon on note due 2022, Jan. 15
  • Shimao $28 million coupon on note due 2026, first deadline Jan. 15
  • Shimao $13 million coupon on note due 2027, first deadline Jan. 16
  • Note: Upcoming payments based on Bloomberg-compiled data

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