Chinese property firms slump as Evergrande angst spreads (updated)

Chinese Estates Holdings

08/10/2021 05:46

* Fantasia onshore bond trade suspended after slumping >50%
    * Property sector shares down 1.5% at midday
    * Evergrande due to pay nearly $150 mln in coupons next week

 (Recasts with market moves, adds Global Times commentary,
changes slug keyword used by media subscribers)
    By Andrew Galbraith and Vidya Ranganathan
    SHANGHAI, Oct 8 (Reuters) - Bonds and shares issued by
Chinese property firms slumped on Friday as onshore markets
returned from a week-long holiday with few clues as to how
regulators propose to contain the contagion from cash-strapped
China Evergrande Group's debt problems.
    Evergrande  3333.HK , whose shares remain suspended since it
requested a trading halt on Monday pending a major transaction
announcement, is facing one of the country's largest defaults as
it wrestles with more than $300 billion of debt.
    The company last month missed coupon payments on two dollar
bond tranches and faces three more early next week totalling
nearly $150 million. The possible collapse of one of China's
biggest borrowers has triggered worries about contagion risks to
the property sector in the world's second-largest economy, as
its debt-laden peers are hit with rating downgrades on looming
defaults.
    That uncertainty battered bonds issued by property firms
such as Kaisa Group  1638.HK , Central China Real Estate
 0832.HK  and Greenland  600606.SS  over China's National Day
break.  urn:newsml:reuters.com:*:nL8N2R13LL
    On Friday, onshore bonds caught up to the selling. The
Shanghai Stock Exchange suspended trading of two bonds issued by
developer Fantasia Group China Co, with one dropping more than
50%, after controlling shareholder Fantasia Holdings Group
 1777.HK  missed the deadline on a $206 million international
market debt payment on Monday.
    In a statement on Thursday evening, Fantasia Group said its
operations were normal and it was maintaining close contact with
investors. It also said it was "actively promoting debt service
protection measures."
    Onshore bonds of Xiamen Yuzhou Grand Future Real Estate
Development, China Aoyuan Group  3883.HK , Yango Group
 000671.SZ  and Guangzhou R&F Properties  2777.HK  also slumped
on Friday.
    Worries around Evergrande contagion also hit mainland share
prices, pulling an index tracking the property sector
 .CSI000952  down 1.5% by midday, against a rise of more than 1%
for blue-chip shares  .CSI300 
    In Hong Kong, the Hang Seng Property and Construction index
 .HSCIPC  fell 0.59%, more than a 0.21% drop for the broader
Hang Seng index  .HSI .
    Bloomberg reported on Thursday that some dollar bondholders
were invited by advisers to a call on Friday 0630 EST (1030 GMT)
to discuss strategy and how to broaden the group.  urn:newsml:reuters.com:*:nL4N2R331W 
    A group of bondholders previously selected investment bank
Moelis & Co and law firm Kirkland & Ellis as advisers on a
potential restructuring of a tranche of bonds, two sources close
to the matter said in September.  urn:newsml:reuters.com:*:nL8N2QI4C5     
    Chinese regulators have not made any comments specifically
on Evergrande during the week-long holiday from Oct. 1, although
the central bank last Wednesday urged financial institutions to
co-operate with relevant departments and local governments to
maintain the "stable and healthy" development of the property
market and safeguard housing consumers' interests.
    In a commentary late on Thursday, the state-backed Global
Times said that authorities' adherence to debt caps known as the
"three red lines" indicated that "China has its own set of
priorities and maintains the focus on deflating the real estate
bubble and reducing risks."
    Investors have been waiting to hear from the company after
it requested a halt in the trading of its shares in Hong Kong on
Monday pending an announcement about a major transaction.
Evergrande Property Services Group  6666.HK , a spin-off listed
last year, also requested a halt and said it referred to "a
possible general offer for shares of the company." 
    While a sale of assets would temporarily ease concerns
around Evergrande's cash flows, analysts also reckon the
indebtedness of Evergrande and some other Chinese property firms
is too large to be resolved quickly. 
    An index of China high-yield debt  .MERACYC , which is
dominated by developer issuers, has been sliding through the
week and on Friday morning hit its lowest level in more than
five years.  urn:newsml:reuters.com:*:nB9N2P902Q It could soon see spreads at their
widest on record.

 (Reporting by Vidya Ranganathan, additional reporting by Megan
Davies in New York; Editing by Sam Holmes and Stephen Coates)
 ((megan.davies@thomsonreuters.com; +1 646 223 6190;))