China's Modern Land defaults on bond payment; property shares drop (updated)

Modern Land (China)

26/10/2021 15:53

* Modern Land cites liquidity issues for non-payment
    * State planner, forex regulator meet with overseas issuers
    * Hang Seng mainland property index falls more than 5%

 (Adds detail on China Evergrande in paras 12-13)
    By Donny Kwok and Andrew Galbraith
    HONG KONG/SHANGHAI, Oct 26 (Reuters) - Modern Land  1107.HK 
defaulted on a bond payment, the latest Chinese property
developer to do so, adding to worries about the wider impact of
the debt crisis at behemoth China Evergrande Group  3333.HK ,
and weighing on shares in the sector.
    Modern Land (China) Co Ltd said in a filing on Tuesday that
it had not repaid principal and interest on its 12.85% senior
notes that matured on Monday due to "unexpected liquidity
issues". The bond has outstanding principal of $250 million.
    Separately, China's state planner said it and the foreign
exchange regulator met with companies in "key sectors", which a
source said included property firms, over their foreign debt
holdings, asking them to "optimise" offshore debt structures and
prepare to repay interest and principal on foreign bonds.
    Modern Land's missed payment comes days after the company, a
smaller developer, scrapped plans to seek investor consent to
extend the maturity date of the bond by three months, saying
doing so was not in the best interests of it and its
stakeholders. 
    Ratings agency Fitch earlier this month cut Modern Land's
rating to "C" from "B" over the attempt to change bond terms,
saying it considered the move a distressed debt exchange. The
debt default prompted ratings downgrades by Fitch and Moody's.
    Developers are defaulting "one by one", said an investor
with exposure to Chinese high-yield debt, who asked not to be
identified as he is not authorised to speak to media.
    "The question is always, who's next?" 
    
    REGULATORS WEIGH IN
    After weeks of near-silence as investor worries over
Evergrande and other developers mounted, Chinese regulators
including the central  nL1N2RB0PHbank have become increasingly
vocal.
    Late on Tuesday, China's National Development and Reform
Commission said that it and the State Administration for Foreign
Exchange had met with foreign debt issuers, telling them to use
funds for approved purposes and "jointly maintain their own
reputations and the overall order of the market". 
    This month, Fantasia Holdings Group  1777.HK  defaulted on a
maturing dollar bond that heightened concerns in international
debt markets, already roiled by worries over whether Evergrande
would meet its obligations.
    Evergrande, which narrowly averted a costly default https://www.reuters.com/world/china/china-evergrande-sends-funds-trustee-bond-coupon-due-sept-23-source-2021-10-22
 last week, is reeling under more than $300 billion in
liabilities and has a major payment deadline on Friday.   
    The company said on Tuesday it would deliver 31 real estate
projects under construction in China's Pearl River Delta region
by the end of 2021. That number will rise to 40 by the end of
June 2022, Evergrande said in comments to Reuters. 
    Evergrande had said on Sunday it had resumed work on more
than 10 projects in six cities, including Shenzhen in southern
China, after earlier halting them because it was unable to pay
contractors. The developer has some 1,300 real estate projects
across China in total.
    Shares of property developers extended losses, hurt also by
concern over China's plans to introduce a real estate tax https://www.reuters.com/business/finance/china-says-will-roll-out-property-tax-pilot-scheme-some-regions-xinhua-2021-10-23.
 
    China's CSI 300 Real Estate Index  .CSI000952  fell 2.8%,
and the Hang Seng Mainland Properties Index  .HSMPI  dropped
4.3%. The broader Hang Seng index  .HSI  edged down 0.4% while
China's CSI300 index  .CSI300  slipped 0.3%.
    The prospect of contagion and more defaults have weighed on
the sector in a major setback for investors. 
    Chinese Estates Holdings Ltd  0127.HK  said it would book a
loss of HK$288.37 million ($2.24 billion) this fiscal year from
its latest sale of bonds issued by Chinese property developer
Kaisa Group Holdings Ltd  1638.HK .
    Modern Land's 11.8% February 2022 bond was down 1.6% at a
discount of over 80% from its face value, yielding about 1,183%,
according to data provider Duration Finance.
    Evergrande shares ended the day down more than 4%. Shares in
its electric vehicle (EV) unit  0708.HK  closed down 6.75% after
earlier rising as much as 5.8%.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Evergrande debt woes are manageable, China central bank official
says     urn:newsml:reuters.com:*:nL1N2RB0PH
China Evergrande secures bond extension as property sector
turmoil deepens     urn:newsml:reuters.com:*:nL1N2RH023
ANALYSIS-What lies beneath? Hidden debt fears feed China's
property woes     urn:newsml:reuters.com:*:nL4N2RB05N
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting By Donny Kwok in Hong Kong, Andrew Galbraith in
Shanghai, and Tony Munroe in Beijing; additional reporting by
Clare Jim and Tom Daly; Writing by Anne Marie Roantree; Editing
by Robert Birsel, Chizu Nomiyama and Emelia Sithole-Matarise)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))