Holders Back Yuan Note Payment Delay; CG Bond: Evergrande Update

(Bloomberg) -- China Evergrande Group avoided what would have been its first default on a public onshore bond as a unit got investor backing to delay repayment of a 4.5 billion yuan ($707 million) note.

Chinese real estate developers extended declines on signs that debt stress is growing in the embattled sector, with Country Garden Holdings Co. reportedly unable to find demand for a $300 million convertible bond. 

Several of China’s largest banks have become more selective about funding real estate projects by local government financing vehicles, concerned that some are taking on too much risk after they replaced private developers as key buyers of land, people familiar with the matter said. 

A gauge of Chinese builders fell 4.5%, set for the most since September, while Country Garden’s shares slid 7.8%. Sunac China Holdings Ltd.’s shares tumbled by a record 23% after a $580 million top-up share sale did little to restore confidence in the firm’s longer-term financial health. The firm said it could “fully meet debt obligations.” Some of China’s most stressed builders face a raft of key payments this week in a test for the country’s volatile credit market.

Key Developments:

• Country Garden Fails To Find Demand For $300M Conv. Bond: IFR
• China Banks Restrict Property Loans to Local Government Firms
• Sunac Bonds, Shares Tumble After $580 Million Stock Offering
• Shimao Proposes to Delay Full Repayment on 2 ABS Until December
• Investors Have Priced In Widespread China Property Distress: AB
• China Developers’ Short-Sighted Moves Are Backfiring: Shuli Ren
• China Property Firms Face Raft of Key Payments This Week (1)

Sunac Says It Can ‘Fully Meet Debt Obligations (11:30 p.m. HK)

Sunac China Holdings said it had total cash of ~160 billion yuan at the end of 2021 and “can fully meet short term debt obligations and project developement needs,” according to a company statement.

Evergrande Unit Holders Back Yuan Bond Payment Delay (8:08 p.m. HK)

Evergrande staved off what would have been the company’s first default on a public onshore bond after holders gave their backing to delay early repayment of a 4.5 billion yuan note.

Bondholders of more than half of the principal agreed to a proposed payment extension, the developer’s Hengda Real Estate Group Co. unit said in a Shenzhen stock exchange filing. The firm had a Jan. 8 deadline to meet investor demands for early repayment before seeking a delay last week, and a vote on the extension offer had been extended to Thursday.

Shanghai Shimao Wires Funds for Bonds Repayment (5:40 p.m. HK)

Shanghai Shimao has wired funds to repay principal and interest for 1.9b yuan of bonds due Jan. 15, according to a statement to Shanghai stock exchange. 

Country Garden Fails To Find Demand for $300M Conv. Bond (4:05 p.m. HK)

Chinese developer Country Garden Holdings failed to find enough demand for a potential $300m convertible bond, according to a report by IFR. 

Morgan Stanley and JPMorgan gauged investor interest but the deal did not go ahead, IFR reported, citing people with knowledge of the matter. Country Garden didn’t immediately respond to a Bloomberg request for comment. The company’s dollar bond due 2024 fell 4 cents on the dollar to 88.2 cents as of 4:23 p.m. in Hong Kong, according to data compiled by Bloomberg. 

China Banks Restrict Property Loans to Local Government Firms (1:40 p.m. HK)

Several of China’s largest banks have become more selective about funding real estate projects by local government financing vehicles, concerned that some are taking on too much risk after they replaced private developers as key buyers of land, people familiar with the matter said.

At least five state-run banks have imposed new restrictions this year on loans to weaker LGFVs and state-owned firms seeking to buy land and develop new real estate projects, said the people, asking not to be identified discussing a private matter. Banks are being more stringent in assessing the financial strength of the local economy and the sales prospects of the projects, said the people.

Evergrande Completes First Batch of Hengchi 5 Car Production (12:58 p.m. HK)

Evergrande completed the first batch of Hengchi 5 eletric car production 12 days earlier than planned, according to a statement on its website. The mass production of Hengchi electric cars is now “in countdown,” it said. 

Sunac Says No More Stock Sales Planned in the Short Term (11:46 a.m. HK)

Sunac China told Bloomberg it doesn’t plan further equity-market financings in the near term, after selling $580 million in new shares and seeing the stock fall a record 20%.

There’s no near-term plan to sell more equity in itself or pare some of its stake in unit Sunac Services, the company said. 

Shimao Proposes to Delay Full Repayment on ABS (10:51 a.m. HK)

Chinese developer Shimao and onshore unit Shanghai Shimao Jianshe will meet with investors Monday to seek approval to extend two ABS repayment deadlines, according to private filings with the Shanghai Stock Exchange seen by Bloomberg News.

Sunac Bonds, Shares Tumble After $580 Million Stock Offering (10:55 a.m. HK)

Sunac China Holdings Ltd.’s bonds and shares fell after the embattled real estate giant raised $580 million in a top-up stock sale to fend off a liquidity crisis. 

The nation’s third-largest property developer by sales sold 452 million shares at HK$10 apiece, a 15% discount to Wednesday’s close in Hong Kong, according to terms of the deal obtained by Bloomberg News. 

The share placement has done little to restore investor confidence in the firm’s longer-term financial health, even though funds will be used in part to repay some loans.

Top China Fund Manager Is Buying Developers’ Dollar Bonds Again (10 a.m. HK)

A top-performing Chinese fund manager is buying dollar bonds of the country’s developers after offloading them last year, betting that authorities will soon unleash further measures to support the sector.

Developer bonds yielding 10% to 20% offer value because investors turned overly pessimistic, according to Deng Sicong, a Beijing-based fund manager at China Asset Management Co. Deng’s fund is the top performer of the past year among the 25 Qualified Domestic Institutional Investor products that give China’s domestic investors access to offshore securities, according to data compiled by Bloomberg. 

Game Theory Suggests China HY Investors May Welcome Haircut (9:10 a.m. HK)

Other distressed developers may follow the same tactic as Guangzhou R&F Properties Co. to extend or freely haircut a portion of their debt, whether in good or bad faith, Bloomberg Intelligence analyst Andrew Chan wrote in a note. This action should diminish investor expectations of distressed bonds being redeemed at par, but at the same time high-yield bondholders may welcome a haircut rather than endure restructuring.

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