Wrapup 1: More Chinese developers seek to extend bond terms to avert default

A-Living Smart City Services

13/01/2022 06:31

(Recasts with details on Shimao, Sunac and Agile; changes slug
for media clients)
    HONG KONG/SHANGHAI, Jan 13 (Reuters) - Cash-strapped Chinese
developers are scrambling to negotiate new terms with their
bondholders to avoid defaults, with Shimao Group  0813.HK  and
Yuzhou Group  1628.HK  the latest seeking extensions on their
maturing debt.
    The market is also watching the outcome of China Evergrande
Group's  3333.HK  meeting with onshore bondholders, as the
voting period to approve an extension will end on Thursday. The
firm has so far met payments on onshore bonds though it has
defaulted on some offshore bonds.
    Struggling with more than $300 billion in liabilities, the
world's most indebted property company is seeking a six-month
delay in the redemption and coupon payments of a 4.5
billion-yuan ($157 million) bond.  urn:newsml:reuters.com:*:nL1N2TL02N
    Chinese developers are facing an unprecedented liquidity
squeeze due to years of regulatory curbs on borrowing, leading
to a string of offshore debt defaults, credit-rating downgrades
and sell-offs in developers' shares and bonds.
    The World Bank's economic prospects report said earlier this
week a severe and prolonged downturn in China's real estate
sector would have significant economy-wide reverberations, as
its developers' combined onshore and offshore liabilities amount
to almost 30% of the country's GDP.
    It warned of risks and potential costs of contagion from a
sharp deleveraging of China's large property firms.
    Shanghai-based Shimao will hold online meetings with
creditors in two asset-backed securities (ABS) on Jan. 17, to
vote on payment extension proposals, according to documents
obtained by Reuters on Thursday.
    The two onshore ABS products - worth 1.17 billion yuan
($183.91 million) in total - are to mature later this month, and
Shimao is seeking to extend the payment deadlines to the end of
2022 while making some payments in stages before the new
deadline, according to the documents, and confirmed by sources.
    Yuzhou, founded in the eastern coastal city of Xiamen, also
announced an exchange offer for two of its 2022 dollar bonds
 KY155530049=   KY193826547=  due later this month - worth a
total of $582 million - to extend the maturities by one year to
avoid default. urn:newsml:reuters.com:*:nL1N2TT02W
    It expects a delay in coupon payments totalling $110 million
that are due in January and February, Yuzhou said in a filing.
It is also seeking consent from holders of all of its other $4.5
billion dollar bonds to amend the terms that would help it avoid
cross defaults if other bondholders seek repayment.
    
    MORE MAY COME
    Nomura estimates the sector's cash crunch could intensify
with firms needing to meet onshore and offshore maturities
totalling around 210 billion yuan each in the first and second
quarter, up from 191 billion yuan in the fourth quarter of 2021.
    Developers are also desperately raising funds to repay debt.
 
    Major player Sunac China Holdings Ltd  1918.HK  said on
Thursday it would raise $580.1 million from a share
sale. urn:newsml:reuters.com:*:nL1N2TT00L
    Media reports said on Wednesday, citing company registry
records, that shares worth 110 million yuan in a few companies
held by Sunac have been frozen by a Shenzhen court.
    Responding to the reports, Sunac said the freeze was caused
by a "minor dispute" between the firm and its partners, but the
parties have come to a reconciliation and are resolving to
unfreeze the shares.     
    Separately, smaller developer Agile Group  3383.HK  pledged
65.6 million shares of its property management unit, A-Living
Smart City Services, on Jan. 6 for an unspecified amount, stock
exchange filing showed. 
    Shares of Chinese developers are generally down on Thursday,
with Sunac and Agile tumbling 19% and 12%, respectively, by
early afternoon. Shimao fell 7.6% while Yuzhou shed 7%.
Evergrande eased 3%.
    One of Yuzhou's yuan-denominated bonds tumbled 21.8% in the
morning before it was ordered to temporarily halt trading. 
    Two Shanghai-traded bonds of Shanghai Shimao  600823.SS 
were also temporarily suspended but after surging over 30%.
   ($1 = 6.3610 Chinese yuan)

 (Reporting by Clare Jim in Hong Kong, Jason Xue, Samuel Shen
and Andrew Galbraith in Shanghai; Editing by Jacqueline Wong)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))