China property firms' shares, bonds hit as Yango seeks new extension (updated)

Ronshine China Holdings

02/11/2021 08:21

(Recasts with Yango ABS extension, investor comment)
    By Andrew Galbraith and Xiao Han
    SHANGHAI/BEIJING, Nov 2 (Reuters) - Chinese developers'
shares and bonds stumbled on Tuesday on worries over spreading
financial contagion, as sources said one of the country's top 20
homebuilders is seeking a new extension for its onshore debts.
    Fujian province-based Yango Group Co. Ltd.  000671.SZ  has
been in talks with investors to discuss the extension of
payments on yuan-denominated asset-backed securities that
holders can redeem this month, three sources familiar with the
matter told Reuters.
    The company plans to repay interest in full, with unpaid
principal rolled over for a year, they said. Reuters was unable
to confirm whether the company would make principal payments on
the securities this month.
    Yango Group did not immediately respond to Reuters' requests
for comment.
    On Monday, Yango offered to exchange some U.S. dollar bonds
for new notes personally guaranteed by its chairman to avoid
defaulting on upcoming debt payments.  urn:newsml:reuters.com:*:nL1N2RS0A4
    Fitch Ratings said Tuesday that it considered that offer a
distressed debt exchange, downgrading Yango's rating to "C" from
"B-". Moody's Investors Service earlier cut Yango's corporate
family rating to Caa2 from B2, citing liquidity risk.
    "Yango may not be able to mobilise all of its cash holdings
to repay its maturing debts, given that most of it resides in
its project companies. In addition, Yango's exposure to its
joint ventures is significant, which could limit its ability to
control its cash flow," Moody's said in a statement.
    China Chengxin International, a domestic agency, said it had
placed the company on a watchlist for possible downgrades, while
Dagong Global Credit Rating Co on Monday cut its outlook on
Yango to negative due to uncertainty over funds for debt
repayments.
    The downgrades and warnings weighed on market sentiment on
Tuesday, pushing Hong Kong's mainland properties sub-index
 .HSMPI  down more than 4% at one point, taking its losses since
an Oct. 22 peak - when China Evergrande Group  3333.HK  narrowly
avoided a $19 billion default - to nearly 17%. 
    The CSI300 real estate index of A-shares  .CSI000952  fell
2.4%, while Yango's own shares fell as much as 9%.
    Yango Group's bonds fell sharply for a second day, with
Duration Finance quoting its 12% March 2024 bond down almost 58%
on the day to less than 13 cents, yielding nearly 160%. Its
Shenzhen-traded April 2024 bond  CN149103=SZ  fell more than
20%, triggering a trading halt.
    November 2022 and 2023 bonds issued by Evergrande unit
Scenery Journey fell more than 12% to about 20% of their face
value ahead of coupon payments totalling $82.5 million this
weekend.  urn:newsml:reuters.com:*:nL1N2RP044
    Bonds issued by developers Yuzhou Group Holdings Co
 1628.HK , Ronshine China Holdings  3301.HK  and Zhenro
Properties Group  6158.HK  also fell more than 10%.
    Clarence Tam, fixed income portfolio manager at Avenue Asset
Management in Hong Kong, said the Yango exchange offer had
aggravated gloomy sentiment. Falling market value forced some
leveraged products to unwind positions, weighing prices down
further, he said.
    "Quality BB and split names ... suffer the most these two
days," said Tam. 
    Evergrande narrowly avoided a catastrophic default for the
second time in a week on Friday, making a last-minute payment on
an overdue dollar bond coupon. On Tuesday its shares  3333.HK 
gave up early gains to fall 2.5%.  urn:newsml:reuters.com:*:nL1N2RO3H1
    Evergrande's woes have brought collateral damage to China's
property sector, with some Chinese developers forced into formal
default on their dollar bonds last month and others proposing
extended payment schedules.
    

 (Reporting by Andrew Galbraith in Shanghai and Xiao Han in
Beijing; additional reporting by Steven Bian in Shanghai;
Editing by Stephen Coates and Nick Macfie)
 ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging:
andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))