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China Developers Dominate World’s Risky Debt: Evergrande Update

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·5 min read
China Developers Dominate World’s Risky Debt: Evergrande Update
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(Bloomberg) -- Chinese property developers are responsible for about half of the world’s distressed dollar bonds, a fresh indication of the magnitude and global nature of the industry’s woes.

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Of the $139 billion of dollar-denominated bonds trading at distressed prices, 46% were issued by companies in China’s real estate sector, according to data compiled by Bloomberg on Oct. 12. That captured bonds trading at yield premiums of at least 10 percentage points above their benchmark rates.

In another sign of weakening investor confidence, demand for Chinese dollar bonds fell in September, as China Evergrande Group’s liquidity woes weigh on the primary market for offshore debt.

More than 24 hours have passed without any clarity about whether embattled developer Evergrande has delivered interest payments due Oct. 11 for three of its dollar bonds. There is a 30-day grace period before any missed payment would constitute a default.

Evergrande’s next test of investor confidence will be on Oct. 19, when a 121.8 million yuan ($18.9 million) of interest is due on a domestic bond. It then has to deliver coupon payments for two dollar notes on Nov. 6.

Key Developments:

  • China Dollar Bond Demand Slumps as Evergrande Stress Mounts

  • China Developers Account for About Half of World’s Troubled Debt

  • China’s Fantasia Forms Internal Debt Restructuring Team

  • China Not ‘Dumb’ Enough for Lehman Moment, StanChart CEO Says

  • Shimao Group Deposits Funds Into Account for USD Bond Redemption

  • China Property Market May Cool Further in 4Q: Securities Journal

Moody’s Cuts Chinese Builder Sinic Further Into Junk (6:10 p.m. HK)

Ratings agency Moody’s downgraded Sinic Holdings Group Co. to Ca from Caa2, following Monday’s announcement of a likely default. It comes three weeks after Moody’s put the Chinese developer on watch for a downgrade.

Sinic said it didn’t expect to pay the principal and last installment of interest due Oct. 18 on a $250 million dollar bond. Moody’s said its ratings outlook was negative.

China Developers Account for About Half of World’s Troubled Debt (4:11 p.m. HK)

In a world where central bank stimulus has wiped out most of the distress from global bond markets, the troubles of China’s property companies are standing out.

Of the $139 billion of U.S. dollar-denominated bonds trading at distressed prices, 46% were issued by companies in China’s real estate sector, according to data compiled by Bloomberg on Oct. 12, which captured bonds trading at yield premiums of at least 10 percentage points above their benchmark rates.

China’s Fantasia Forms Internal Debt Restructuring Team (4:09 p.m. HK)

Fantasia Holdings Group has formed an internal debt and assets restructuring team, to be led by executive director Ke Kasheng, according to a company WeChat post Wednesday. The team will “coordinate the group’s debt and asset restructuring, and resolve liquidity risks,” the post said.

Yango’s Onshore Bonds Keep Falling Despite Denying Project Rumor (2:17 p.m. HK)

Some of Chinese developer Yango Group Co.’s onshore bonds continued to tumble Wednesday, even after last week’s denial of social media chatter that a housing project had been halted.

Shimao Deposits Funds Into Account for USD Bond Redemption (12:59 p.m. HK)

Shimao Group Holding Ltd. deposited funds into the trustee’s bank account for redemption of notes in full on Oct. 15 at an outstanding principal of $820 million, with interest accrued to the maturity date, according to an exchange filing.

The developer’s investment-grade dollar bonds dropped Wednesday morning, according to credit traders.

Malaysia Says Banks Have Limited Exposure to Chinese Developers (12:57 p.m. HK)

Malaysian banks have limited exposure to Chinese developers and any fallout from the debt woes facing the nation’s property industry will be manageable, according to Bank Negara Malaysia.

“From a financial stability perspective, Malaysian banks have limited direct exposure domestically or through their overseas operations to the real estate sector in China,” the central bank said by email to Bloomberg Tuesday night. “The impact on Malaysian banks from any heightened credit risk arising from the recent developments in China is expected to be manageable.”

Hong Kong Cancels Stock Trading Because of Typhoon Kompasu

Hong Kong suspended schools and the city’s $6.3 trillion stock market canceled trading Wednesday as strong winds and rain from typhoon Kompasu lashed the financial hub.

Beijing Delays Some Land Auctions as Market Cools, Securities Daily Says (8:13 a.m. HK)

Beijing postponed auctions of 26 land plots while the city of Hangzhou scrapped bids for 17 this week amid the government’s efforts to cool down the housing market, Securities Daily reported, citing statements from the cities.

China Not ‘Dumb’ Enough for Lehman Moment, StanChart CEO Says (8:02 a.m. HK)

The Chinese government won’t allow the turbulence surrounding Evergrande to turn into a systemic crisis, the chief executive officer of Standard Chartered Plc said.

The lender, which has a heavy focus on Asia, has no “concerning exposures to the property sector,” Bill Winters said in an interview with Bloomberg Television recorded in London on Tuesday.

Evergrande Halt Has Nothing on 11 Years: What to Watch in China (7:50 a.m. HK)

Evergrande’s trading halt has led to days without a company statement detailing the reason -- and it’s all too familiar for Hong Kong traders who’ve had to navigate dozens of similar episodes this year alone.

Some 81 stocks on Hong Kong’s main board have been suspended for three months or more, according to exchange data as of Sept. 30. Most were halted in 2021, including China Huarong Asset Management Co. -- the bad-debt manager that roiled markets after delaying its earnings report. In the U.S., suspensions are capped at just 10 days.

China Property Market May Cool Further in 4Q: Securities Journal (7:33 a.m. HK)

The property market faces cool-down pressure in the fourth quarter as the government’s property control policies remain tight, China Securities Journal reported, citing unidentified research institutions.

Most developers have become more prudent in their bidding in the second half of this year amid a grim outlook for financing and falling gross margins for the whole sector, the report cited a research note by CSC Financial Co. as saying.

Evergrande dollar bond interest deadlines:

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