Wrapup 1: Shimao puts residential projects on sale as China property woes deepen

Modern Land (China)

10/01/2022 04:44

(Recasts, adds analyst comments)
    * Shimao puts all residential, commercial assets on sale -
Caixin
    * Evergrande onshore bondholders to decide on extension 
    * Some Modern Land offshore bondholders demand early
repayment
    * Latest developments underline deepening debt crisis in
sector

    By Clare Jim
    HONG KONG, Jan 10 (Reuters) - Shimao has put all its
projects on sale, local media reported, as Chinese property
developers face mounting pressure to negotiate with their
creditors to ease a liquidity squeeze in the sector that is
threatening to push more firms into default. 
    China Evergrande Group  3333.HK , the world's most indebted
developer, is seeking a six-month delay in the redemption and
coupon payments of a 4.5 billion yuan ($157 million) bond in a
meeting with bond holders. The outcome of the meeting is
expected later Monday.  urn:newsml:reuters.com:*:nL1N2TL02N
    Evergrande is struggling to repay more than $300 billion in
liabilities, including nearly $20 billion of offshore bonds
deemed in cross-default by ratings agencies last month after it
missed payments.  urn:newsml:reuters.com:*:nL1N2TF01X
    Reuters reported last week that China will make it easier
for state-backed property developers to buy up distressed assets
of debt-laden private peers, another step by policymakers to
avert a liquidity crisis in the sector.  urn:newsml:reuters.com:*:nL1N2TN03H
    Smaller peer Shimao Group Holdings  0813.HK , which
defaulted on a trust loan last week, has put on sale all of its
real estate projects, including both residential and commercial
properties, Caixin reported over the weekend.  urn:newsml:reuters.com:*:nL1N2TQ00Y
    The Shanghai-based property developer has struck a
preliminary deal with a Chinese state-owned company to sell its
Shimao International Plaza Shanghai, a commercial property on
Shanghai's Nanjing Road, for more than 10 billion yuan, the
report said.
    The company did not respond to a request for comment.
    Daiwa said in a research report that Shimao will find itself
in a vicious cycle of liquidity issues given the recent negative
news, even though the firm said it is not in debt servicing
default.
    Shimao unit Shanghai Shimao Construction said on Friday that
it was in talks with China Credit Trust to resolve a $101
million defaulted loan payment.
    The missed trust payment would not accelerate payment
requests in the open bond market, it added. 
    Reuters also reported on the same day that the unit has
proposed extensions on maturities for two asset-backed
securities (ABS) due this month totalling 1.17 billion yuan
($183.50 million).  urn:newsml:reuters.com:*:nL1N2TN03H    
    "We believe negative publicity will erode the confidence of
home buyers and investors," Daiwa said. "This, in turn, would
negatively impact Shimao’s future refinancing activities and
contract sales prospects and lead to further deteriorating cash
flows and liquidity."
     It estimates Shimao to have around 23 to 25 billion yuan in
corporate bonds, ABS and trust loans due for payment in 2022,
noting it has only 16.1 billion yuan in cash.
    
    LIQUIDITY CRISIS
    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.
    Small developer Modern Land  1107.HK , which has missed
payment for its 12.85% notes due Oct 25, 2021, said in a filing
on Monday it has received notices from certain noteholders
demanding early repayment of their senior notes.
    The developer said it has been in discussion with these
creditors for a waiver and it has appointed financial advisers
to formulate an overall plan for feasible remediation actions.
    The firm is also in talks with noteholders on a
restructuring plan for its $1.3 billion of offshore bonds, it
added.
    "It's going to be the peak of repayment period and we'll see
more developers default," said Kington Lin, managing director of
Asset Management Department at Canfield Securities Limited.
    "The market is watching how many SOEs will get more M&A
loans to help the developers in distress." 
    Modern Land shares, which have been suspended since Oct. 21,
sank nearly 40% on Monday morning to HK$0.23, a historical low.
    As at 0335 GMT, shares of Evergrande fell 3.4%, while Shimao
gained 3%.

 (Reporting by Clare Jim and Donny Kwok in Hong Kong, Samuel
Shen in Shanghai; Editing by Kim Coghill & Shri Navaratnam)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))