Times China Downgraded; Shimao Eyes Extension: Evergrande Update

(Bloomberg) -- Shimao Group Holdings Ltd. is seeking to extend repayment on about 6 billion yuan ($947 million) of high-yield trust products over three years, people familiar with the matter said. That’s a reminder of the troubled Chinese property industry’s mounting stress, which the firm appeared to have largely skirted until recent months.

Shimao’s dollar bonds fell further on Thursday, with both its 4.75% note and 6.125% debt dropping for a fourth-straight session. Times China Holdings Ltd.’s U.S. currency notes, meanwhile, fell after Moody’s Investors Service cut its rating further into junk territory. A Bloomberg Intelligence gauge of developers declined 0.8% after rebounding a day earlier. 

As transparency worries resurface among developers, stock and bonds of Zhenro Properties Group Ltd. have tumbled on concerns that it may not proceed with a planned redemption of its $200 million perpetual note. The bond has dropped to as little as 23 cents on the dollar from 93 cents a week ago. 

Key Developments:

• Shimao Seeks Repayment Extension on $947 Million in Trusts
• Zhenro Rout Signals Fragile Confidence in China’s Developers
• China Developer Bondholders Brace for Long Road to Repayments
• China AMCs May Not Be White Knights for Developers’ Bondholders
• Hong Kong Sells Premium Land Site for Record-Breaking Price

Yango Group Fails to Pay Interest for Two Dollar Bonds (7:02 p.m. HK)

Yango Group Co. Ltd missed interest payments of a combined $27.3 million for its two dollar bonds, listed on the Singapore Exchange, within a 30-day grace period, according to a Shenzhen stock exchange filing.

The company cited a temporary liquidity shortage as a reason for the missed payments. The incident may trigger the relevant clause of domestic bonds and Yango will hold a bondholders meeting.

China High-Yield Dollar Bonds Extend Declines as Builders Fall (5:06 p.m. HK)

Chinese high-yield dollar bonds fell 1-3 cents on the dollar, credit traders said, putting them on track for a fourth day of declines.

Market hasn’t had such a streak on a closing basis in a month, according to a Bloomberg index,

Times China Downgraded by Moody’s (4:44 p.m. HK)

Times China’s long-term corporate family rating was downgraded by Moody’s to B1 from Ba3, and its senior unsecured grade was cut to B2 from B1. The outlook on the ratings remains negative.

“The downgrade reflects Times China’s reduced liquidity buffer due to weakened funding access and continued cash spending on urban redevelopment projects,” Moody’s said in a statement.

The developer’s dollar bonds hit session lows on the rating cuts.

Zhenro’s Communications Hurt Confidence: Lucror (3:45 p.m. HK)

Poor investor communications this week “resulted in an evaporation of confidence” in Chinese builder Zhenro, said Leonard Law, a credit analyst at Lucror Analytics.

“Management failed to dispel last Friday’s rumors” about it possibly not proceeding with an announced $200 million perpetual-bond redemption with a “very generic announcement that did not clarify if it will” do so, Law said.

Shimao Dollar Bonds Extend Declines (11:41 a.m. HK)

Shimao’s dollar bond fell further Thursday morning, with some on pace for a fourth day of declines. Its 4.75% dollar bond due July 3 dropped 2.4 cents on the dollar to 59 cents as of 4:18 p.m. in Hong Kong, Bloomberg-compiled prices show. Its 6.125% note due 2024 decreased 2.7 cents to 40.9 cents. Both have fallen more than 11 cents this week.

Dividend Cuts May Benefit Developer Bonds: BI (11:30 a.m. HK)

Several major distressed developers in China are still forecast to pay large amounts of dividends, which may seem unlikely due to current difficult industry conditions, with sales slumping and offshore refinancing channels almost fully shut, Bloomberg Intelligence credit analysts Andrew Chan and Daniel Fan wrote in a report.

Relatively strong developers such as CIFI Holdings Group Co., Country Garden Holdings Co. and Longfor Group Holdings Ltd. may not entirely cut their dividends, but may reduce the size to preserve cash in the current downturn, which could hurt their equity prices but would likely be positive for their bonds, they wrote.

Zhenro Rout Shows Concern About Developers (8:45 a.m. HK)

Investor confidence in Zhenro has been shaken by concerns that it may not proceed with the planned perpetual-bond redemption, sparking a selloff in its stock and bonds. 

About $1.5 billion has been wiped from Zhenro’s Hong Kong-traded shares in the past week, and its credit ratings have been slashed amid questions over its ability to raise cash. 

Shimao Seeks Repayment Extension on $947 Million in Trusts (6:11 p.m. HK)

Shimao is seeking to extend repayment on about 6 billion yuan of high-yield trust products over three years, according to people familiar with the matter. Shimao told investors Wednesday that it has about 1.3 billion yuan of these short-term investments due this month and 4.7 billion yuan maturing between April and August, said the people, asking not to be identified discussing a private matter. 

The developer proposes to repay 25% of the principal in 2022, 35% next year and the rest in 2024, the people said. The products were issued through Citic Trust Co., the nation’s largest trust firm.

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