Chinese developer Xinyuan avoids default, lending curbs loosen (updated)

Xinyuan Real Estate Co

15/10/2021 11:39

* Xinyuan Real Estate agrees to exchange offer with
bondholders
    * Some large banks told to loosen mortgage restrictions
-Bloomberg
    * Developer bonds deepen rout, shares edge lower

 (Adds details on Evergrande, PBOC official's comments, bond
prices)
    By Andrew Galbraith
    SHANGHAI, Oct 15 (Reuters) - A Chinese real estate developer
avoided a default on a maturing dollar bond on Friday, as
homebuilders struggled with the spreading impact of a crisis at
China Evergrande Group  3333.HK , the world's most indebted
developer.
    A China central bank official later calmed markets by saying
spillover effects from Evergrande's debt woes were controllable.
 urn:newsml:reuters.com:*:nB9N2QE01N
    Xinyuan Real Estate Co's  XIN.N  bondholders had agreed to
an offer to accept new bonds and cash in exchange for maturing
notes, the developer said in a filing to the Singapore Exchange
on Friday. 
    Xinyuan said that holders of more than 90% of the company's
$229 million notes due Oct. 15 had agreed to the exchange, which
would see it deliver new bonds worth $205.4 million and $19.1
million cash. 
    Xinyuan's 14.5% September 2023 bond crashed nearly 30% on
Friday to trade at 58.35 cents, according to data provider
Duration Finance.
    The agreement follows warnings from other developers that
they could default on their bonds, while still others have taken
steps to delay payments in the wake of Evergrande's troubles.
China's No.2 developer, with more than $300 billion in
liabilities and 1,300 real estate projects in over 280 cities,
missed a third round of interest payments on its international
bonds this week.
    Chinese developers face more than $500 million in coupon
payments on their high yield bonds before the end of this month.
Refinitiv data show coupon payments by Kaisa Group Holdings
 1638.HK  and Fantasia Holdings  1777.HK  are due this weekend.
 urn:newsml:reuters.com:*:nL1N2R80FT 
    In a sign that authorities may be trying to curb the impact
of developers' debt woes, Chinese regulators have told some
major banks to accelerate mortgage approvals in the fourth
quarter, Bloomberg reported Friday, citing unidentified sources.
    Lenders were also allowed to seek permission to sell assets
backed by residential mortgages in order to free up more loan
quota, the news agency said.
    The PBOC and the China Banking and Insurance Regulatory
Commission (CBIRC) did not immediately respond to Reuters
requests for comment.
    
    EMBATTLED EVERGRANDE
    Evergrande suffered new setbacks on Friday with sources
telling Reuters that Chinese state-owned Yuexiu Property
 0123.HK  pulled out of a proposed $1.7 billion deal to buy the
company's Hong Kong headquarters building over worries about the
developer's dire financial situation.  urn:newsml:reuters.com:*:nL8N2R94IG 
    Evergrande has been scrambling to divest some assets to
repay creditors knocking on its doors. With more than $300
billion in liabilities, it has already missed three rounds of
interest payments on its international bonds, but the collapse
of the talks shows the difficulties it is facing. 
    Adding to its difficulties, Hong Kong's audit regulator said
on Friday it was investigating Evergrande's 2020 accounts and
their audit by PwC because it had concerns about the adequacy of
reporting on whether it could continue operating as a going
concern.  urn:newsml:reuters.com:*:nL1N2RB0I1 
    Evergrande bonds fell following the Reuters report. The
company's 8.75% June 2025 bonds  XS1627599654  slumped more than
6% to trade at a discount of more than 80% from its face value,
according to data provider Duration Finance. 
    
    BOND SLUMP DEEPENS
    Apart from Xinyuan, Duration Finance data showed other
developers' bonds deepening their rout on Friday. Sinic Holdings
Group's 10.5% June 2022 bond  VG218484883=  dived more than 20%
to just 12.25 cents, and Ronshine China Holdings' February 2022
bond fell more than 6% to 68.35 cents.
    Spreads on Chinese high-yield corporate dollar bonds
 .MERACYC  touched a fresh record late Thursday evening U.S.
time, having nearly tripled since late May, while
investment-grade spreads remained near their widest in more than
two months  .MERACCG .
    Worries of contagion have also hit property developers'
shares this week. On Friday, an index tracking A-shares in the
sector  .CSI000952  gave up small gains to end down 0.1%,
lagging a 0.38% gain in the blue-chip index  .CSI300  and taking
losses since Tuesday to 4.5%.
    China has been ramping up property market curbs since late
2020, introducing new measures to closely monitor and control
the debt levels of developers.
    But with economic growth cooling and new construction starts
slowing, speculation has been rife over whether it would start
relaxing those restrictions, as was done during past
downturns. ECILT/CN  
    Chinese leaders, fearful that a persistent property bubble
could undermine the country's long-term ascent, are likely to
maintain tough curbs on the sector but could soften some tactics
as needed, policy sources and analysts told Reuters this
week. urn:newsml:reuters.com:*:nL4N2R933E
    Yi Gang, governor of the People's Bank of China, told 24
financial institutions last month to "maintain the steady and
healthy development of the real estate market and safeguard the
legitimate rights and interests of housing consumers." 
    Chinese regulators, who want to impose financial discipline
while avoiding social unrest, have taken targeted measures such
as asking state-backed firms to pick up Evergrande assets to
ease its liquidity situation.  urn:newsml:reuters.com:*:nL4N2QT23E 


 (Reporting by Andrew Galbraith, Cheng Leng and Tony Munroe,
additional reporting by Alun John; Editing by Kim Coghill and
Jacqueline Wong)
 ((cheng.leng@thomsonreuters.com; +8610-5669-2129;))