China developer Yango offers bond swap, backstopped by its chief, to avert default (updated)

Xinyuan Real Estate Co

01/11/2021 07:47

(Adds details of offer, bond price moves, fund manager comment
and context)
    By Andrew Galbraith
    SHANGHAI, Nov 1 (Reuters) - Chinese developer Yango Group
 000671.SZ  offered on Monday to exchange some of its U.S.
dollar bonds for new notes personally guaranteed by its chairman
as it struggles to free up cash and avoid defaulting on upcoming
debt payments.
    Yango's liquidity crunch comes against the backdrop of a
crisis at China Evergrande Group  3333.HK , which has stoked
concern among investors globally about the country's deeply
indebted, $5 trillion property sector and tightened funding
access for other developers. 
    Yango is offering $25 in cash and $1,000 in new notes for
each $1,000 of existing bonds exchanged, it said in a Hong Kong
bourse filing. The exchange offer applies to its U.S. dollar
notes due in February 2023, January 2022 and March 2022, which
have an outstanding face value of $747 million.
    The new bonds are personally guaranteed by Lin Tengjiao,
Yango's founder and chairman, the filing said. The Hurun Global
Real Estate Rich List of March 2020 had estimated Lin's personal
fortune at $2.4 billion.
    Yango said it is also seeking the support of investors to
change the terms of its five other outstanding dollar bonds.
    It said the offer was part of "overall efforts to improve
our liquidity, preserve options to stabilize our operations as a
going concern, and avoid imminent payment defaults and potential
holistic restructurings of our debts and business operations."
    Government policy tightening, credit events and
deteriorating consumer sentiment had cut off refinancing avenues
for property firms "and put enormous pressure on our short-term
liquidity, Yango said.
    
    SHARES, BONDS SLUMP 
    The announcement follows a report from financial information
provider Redd on Friday that Yango had asked holders of its
asset-backed securities (ABS) to refrain from asking for
repayment for a year over concerns it would struggle to pay this
month.  urn:newsml:reuters.com:*:nL1N2RQ02N
    Yango's shares in Shenzhen plunged 7.5% on Monday and are
down by nearly a quarter over the past week. The CSI300
real-estate sub-index  .CSI00952  slipped 1.6% on Monday against
a 0.4% drop in the blue-chip index  .CSI300 .
    In the onshore bond market, the Shenzhen Stock Exchange
halted trading of Yango's April and August 2024 yuan bonds
 CN149208=SZ   CN149103=SZ  after they fell more than 30% on the
day.
    "The ABS are maturing on Nov. 8, so it's a bit dangerous.
The onshore market is anxious," said a Beijing-based portfolio
manager who asked not to be named, as he was not authorised to
speak with media.
    In international debt markets, Yango's 7.5% February 2025
dollar bond fell more than 20% to a discount of about 85% of its
face value, according to Duration Finance. Other Chinese
developers' bonds also slumped, weighing on an Asian high-yield
bond ETF  AHYG.SI , which fell more than 1%.
    Yango has eight outstanding U.S. dollar bonds worth a total
$2.24 billion and 14 outstanding yuan-denominated bonds worth
13.1 billion yuan, according to Refinitiv data. Holders of the
February 2023 notes, worth a total of $247 million, have the
option to demand early repayment on Nov. 12.
    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 just before its grace period
expired.  urn:newsml:reuters.com:*:nL1N2RO3H1
    Its woes have brought collateral damage, with some other
Chinese developers forced into formal default on their dollar
bonds last month.
    But one developer, Xinyuan Real Estate Co  XIN.N , avoided a
default on a maturing dollar bond in October by reaching an
agreement with bondholders to exchange maturing notes for new
bonds and cash.  urn:newsml:reuters.com:*:nL1N2RB0KD    

 (Reporting by Andrew Galbraith; Editing by Muralikumar
Anantharaman)
 ((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging:
andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))