Payment Deadline Looms Amid Bond Selloff: Evergrande Update

(Bloomberg) -- Another key bond-payment deadline began to loom for China Evergrande Group as the sell-off among the country’s beleaguered property developers deepened.

Evergrande unit Scenery Journey Ltd. has $82.5 million in coupons on two dollar bonds coming due this Saturday. Last week, Evergrande’s bondholders received an overdue interest payment just before the expiration of a grace period, buying the debt-stricken company more time to raise cash from asset sales.

China’s dollar high-yield bonds fell for an eighth straight day Monday, extending the worst two-month slide in a decade. Yango Group Co.’s onshore bonds were among the biggest losers, prompting trading halts, after the developer said it’s seeking to extend some dollar notes to avoid default.

Major builders saw home sales tumble 32% in October from a year earlier, according to China Real Estate Information Corp., a decline that may exacerbate a cash crunch as the government seeks to curtail leverage in the property sector and bond refinancing becomes increasingly difficult. More than $2 billion of debt is coming due at China’s stressed property developers this month. 

For a calendar on bond interest and principal payments due in November, see here. 

Still, the banking system has so far managed to shrug off the property-industry slump. China’s biggest state-run banks extended their earnings recovery in the third quarter, fueled by rising credit demand and improving asset quality, results showed last week. Banks are likely to further cut their proportion of loans to the real estate sector, the central bank-run Financial News said Monday. 

Key Developments:

• Stressed China Builders Face $2 Billion Bond Bill This Month
• Evergrande’s Sales Slump Could Intensify Liquidity Woes: React
• China Developers’ Dollar Bond Sales Fall to Lowest in 18 Months
• Beware the China Evergrande Dominoes: Zhang & Yang
• Expanded Property Tax May Only Move Market in Years: China Today
• Two Thirds of China’s Top Developers Breach a ‘Red Line’ on Debt

Dollar-Bond Sales Hit 18-Month Low (3:45 p.m. HK) 

Chinese real estate firms’ sales of dollar bonds tumbled to their lowest level since pandemic worries roiled markets last year, as default risks have effectively frozen borrowers out of the offshore market. There were $1.25 billion of such notes priced by six real estate companies in October, an 81% plunge in issuance from a year earlier and the lowest since April 2020, according to data compiled by Bloomberg.

Zhenro Properties to Redeem 2021 Notes Early (3:38 p.m. HK)

Zhenro Properties said it will redeem the 5.95% dollar notes due 2021 in full early at 100% of principal amount plus accrued and unpaid interest, according to statement to the Hong Kong stock exchange.

It will redeem the notes, which have an outstanding amount of $200 million. on Nov. 16. Upon redemption, the notes will be canceled.

Yango Tries to Avert Default With Bond Swap (3:30 p.m. HK)

Several onshore bonds of Yango plunged Monday to record lows, prompting trading halts, after the Chinese developer said it was seeking to extend three of its dollar notes to improve liquidity and avoid default.

“Existing internal resources may be insufficient,” the Shanghai-based builder said in a filing. The company’s shares fell 7.5% in Shenzhen, hitting a seven-year low. 

Chinese dollar high-yield bonds dropped for an eighth straight day Monday after tumbling nearly 9 cents on the dollar last month, closing out the worst two-month slide in a decade. Spreads on some investment-grade notes widened. 

China to Keep Cutting Mortgages in Loans (3:05 p.m. HK) 

China’s banks are likely to further cut their proportion of loans to the real estate industry, according to an article in the central bank-run Financial News. Funding to the sector will be used more in regions that are backed by industries and have advantages in attracting population growth, according to the report. Manufacturing, technological innovation and rural development will receive more financial support, it said.

China’s Home Sales Slumped in October (11:48 a.m. HK)

New-home sales by area at the nation’s top 100 developers fell 32% in October from a year earlier, a report by property research firm China Real Estate Information Corp. showed on Monday. Sales rose 1.4% from a month earlier. The outlook for the property market doesn’t look promising and sales may continue to slow toward the end of the year, according to the CRIC report. 

Chinese Developer Redsun Pays Off Bond (8:20 a.m. HK) 

Redsun Properties Group Ltd. redeemed a dollar bond that matured on Saturday, according to a stock exchange filing. The note had $83 million outstanding following some recent repurchases, Redsun said previously. Redsun has an additional $1.9 billion of dollar bonds outstanding, the next one maturing in April, according to data compiled by Bloomberg.

Property Tax May Take Years to Move Market (6 a.m. HK) 

Chinese financial markets were mostly unfazed after Beijing decided to expand property-tax trials by imposing levies on some homeowners. While details remain elusive, analyst consensus points to limited immediate market impact beyond real estate sectors.

The trials are expected to last five years, paving the way for an eventual nationwide rollout. While the taxes are “untimely” and may exacerbate negative sentiment toward developer stocks, there is little incremental drag on sectors that are already facing headwinds, according to Cheng Wee Tan, a Singapore-based senior equity analyst at Morningstar.

Two-Thirds of Top Developers Breach a ‘Red Line’ (5 a.m. HK) 

China’s indebted developers are struggling to meet Beijing’s tighter financing rules. Two-thirds of the top 30 Chinese property firms by sales ranked by the China Real Estate Info Corp. have breached at least one of the metrics known as the “three red lines,” data compiled by Bloomberg showed as of Oct. 29. 

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