China's property sector stalked by Evergrande default fears (updated)

Xinyuan Real Estate Co

12/10/2021 12:22

* Evergrande could be formally declared in default Oct.
18-19
    * Property firms top losers in Shanghai exchange traded
bonds
    * Some property shares gain on hopes of policy support

 (Adds big falls for Kaisa and Greenland)
    By Clare Jim, Andrew Galbraith and Marc Jones
    HONG KONG, Oct 12 (Reuters) - Debt-saddled Chinese property
firms took heavy fire in bond markets on Tuesday, after the
poster child of the sector's woes, Evergrande Group  3333.HK ,
missed its third round of bond payments in as many weeks and
others warned of defaults. 
    A wave of developers face payment deadlines before the end
of the year and with Evergrande's fate looking increasingly
bleak, fears are mounting of a wider crisis.
    Weary Evergrande bondholders still haven't received almost
$150 million worth of coupon payments that had been due on
Monday, although there was little surprise after the firm had
skipped two other payments in recent weeks.  urn:newsml:reuters.com:*:nL4N2R722V 
    Evergrande didn't reply to a Reuters request for comment. It
has maintained radio silence for weeks and markets are now
counting down to a Oct. 18-19 deadline when it will be formally
declared in default if it still hasn't stumped up. 
    "It is pretty serious now and it looks like it is going to
be long and drawn out process," said London-based Trium Capital
fund manager Peter Kisler about Evergrande and the wider crisis.
    "I don't see the recovery being particularly high," he said
referring to what Evergrande bondholders would get if Evergrande
gets broken up. "I think 20 cents (for every dollar of the
bonds' original face value) is more or less fair."  
    Problems have already spread well beyond just Evergrande. 
    Mid-sized rival Fantasia  1777.HK  also missed a payment and
Modern Land  1107.HK  and Sinic Holdings  2103.HK  are trying to
delay deadlines that would still most likely be classed as a
default by the main rating agencies.
    
    LOOMING DEADLINES 
    Refinitiv data shows there is at least $92.3 billion worth
of Chinese property developers' bonds coming due next year.
 urn:newsml:reuters.com:*:nL1N2R80FT
    Seaport Global's EM Corporate Credit analyst Himanshu Porwal
said the key dates and payments to watch this year were:
    Oct. 15 - Shimao  0813.HK  $820 million
    Oct. 15 - Xinyuan  XIN.N  $229 million 
    Oct. 18 - Sinic  2103.HK  $244 million
    Oct. 27 - Seazen Holdings  601155.SS  $100 million
    Nov. 8 - Central China Real Estate  0832.HK  $400 million
    Nov. 18 - Agile  3383.HK  $200 million
    Nov. 18 - Zhenro  6158.HK  $200 million
    Dec. 3 - Ronshine China  3301.HK  $150 million
    Dec. 7 - Kaisa  1638.HK  $400 million
    Dec. 17 - Fantasia  1777.HK  $249 million  

    The $5 trillion Chinese property sector, accounts for around
a quarter of the Chinese economy by some metrics and is often a
major factor in Beijing policymaking.
    "We see more defaults ahead if the liquidity problem does
not improve markedly," said brokerage CGS-CIMB in a note, adding
developers with weaker credit ratings would find it very
difficult to refinance debt at the moment.
    Shanghai Stock Exchange data showed the top five losers
among exchange-traded bonds in morning deals were all issued by
property firms.    
    Modern Land's dollar bond due for repayment in 2023
 BS227761342=  plunged 25% to 32.250 cents on the dollar, while
Kaisa Group, which was the first Chinese property developer to
default back in 2015, and Greenland Holdings, which wants to
build western Europe's tallest residential building, both saw
more savage selling.  XS200223551=1M   XS201676843=1M 
    It wasn't all one-way traffic. Sinic's bond due in 2022
 XS2281324389  rose 12% to 19.35 cents. That still left its
yield - a proxy of its likely borrowing cost if it were to try
and tap financial markets - at over 1,380%. Some of Central
China Real Estate's bonds due next month also gained.
 XS151296637=1M 
    Modern Land, whose shares dropped over 3% to new low on
Tuesday, asked bondholders on Monday to delay for three months a
repayment due later this month, while Sinic said it would likely
default next week.  urn:newsml:reuters.com:*:nL1N2R703A
        
    BROADER FALLOUT?
    Market indicators also show how contagion is slowly
spreading to other high yield markets in the developing world.
    Trium's Kisler highlighted how most emerging market
companies whose yields were already around the 10% mark have
been hit and even riskier sovereign markets like Ecuador may be
suffering some blowback.
    The cost of insuring against a China sovereign default also
continued to rise on Tuesday, with 5-year credit default swaps
 CNGV5YUSAC=MG  - which investors typically use as a hedge
against rising risk - hitting their highest since April 2020.
    Shares of several other property firms, however, fared
better as markets bet on more loosening of policies following
northeastern city of Harbin's measures to support developers and
their projects.  urn:newsml:reuters.com:*:nL1N2R70AY
    Top developers Country Garden  2007.HK  and Sunac China
 1918.HK  both rose 2% despite a 1% drop in the wider market
 .SSEC .
    Evergrande's electric vehicles unit  0708.HK  also jumped
over 10% after it vowed to start producing cars next year.
 urn:newsml:reuters.com:*:nL1N2R70R3

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China's property bond market collapses    https://tmsnrt.rs/3AwVUos
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 (Additional reporting by Scott Murdoch
Editing by Shri Navaratnam and Mark Potter)
 ((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net  Twitter
@marcjonesrtrs))