Chinese developer misses bond payment as stress spreads beyond Evergrande crisis

A pedestrian crosses a road in front of residential buildings in Beijing, China.

Qilai Shen | Bloomberg | Getty Images

On the heels of Evergrande’s debt crisis, there are increasing signs of stress in China’s property market after one developer failed to make a bond payment on Tuesday.

Ratings agencies have downgraded Chinese developers Fantasia Holdings and Sinic Holdings over risks from their strained cash flow situations.

Fantasia did not repay a bond that matured on Monday, it said in a filing to the Hong Kong exchange.

The firm has halted trading of its shares since Sept. 9 until further notice, it said. Those shares have plummeted nearly 60% year-to-date.

CNBC reached out to both companies but did not immediately get a response.

Evergrande contagion fears

“We believe the existence of these bonds means that the company’s liquidity situation could be tighter than we previously expected. The late payment also raises doubts about the company’s ability to repay its maturities on a timely basis,” Fitch wrote.

“Furthermore, this incident casts doubt on the transparency of the company’s financial disclosures,” it added.

China’s property sector has come under the spotlight since the debt problems of Evergrande surfaced.

Evergrande — the second-largest developer in China by sales — has warned twice it could default, setting off investor worries. It missed interest payments on two U.S.-dollar offshore bonds so far, and has been scrambling to raise cash to pay suppliers and investors.

Other developers have also been scrambling for cash, signaling further distress in the sector.

Guangzhou R&F is another real estate developer on the radar of investors. It said last month it was raising as much as $2.5 billion by borrowing from major shareholders and selling a subsidiary, according to Reuters.

Fitch revised its outlook from stable to negative last month, citing its limited access to funding amid ongoing refinancing needs.

CNBC reached out to Guangzhou R&F for this report but did not immediately hear back.

Industry watchers have been concerned about the fallout and possible contagion from the Evergrande crisis hitting China’s growth. The real estate sector in China accounts for as much as 15% of the Asian giant’s gross domestic product, according to analyst estimates.

Many Asian high-yield bond funds are also dominated by Chinese real estate developers.

Returns for the ICE Bofa High Yield Asia Emerging Markets Corporate Plus index have plummeted to -9.89% year-to-date, according to data from Refinitiv Eikon.

Sinic likely to default, S&P says

Source link

Leave a comment

%d bloggers like this: