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Agile downgraded by S&P; contagion roars back: Evergrande update

With the rating firm citing depleting cash and poor liquidity amid big debt maturities and limited refinancing options.
Image: Qilai Shen/Bloomberg

Agile Group was downgraded further into junk territory by S&P Global Ratings with the rating firm citing depleting cash and poor liquidity amid big debt maturities and limited refinancing options.

Shanghai Pudong Development Bank Co. plans to sell bonds worth 30 billion yuan ($4.7 billion) to fund loans for property acquisitions, in a move aimed at easing stress in China’s struggling real estate industry.

Financial contagion is roaring back in China’s property industry, putting renewed pressure on Xi Jinping’s government to do more to insulate the stronger developers.

Some higher-rated developers saw their dollar notes rebound Tuesday, after the previous day’s turmoil in property bonds on concerns over the scale of hidden debt in the industry. Country Garden Holdings Co. notes gained after a record selloff, as the builder also disclosed $10 million of repurchases. A Logan Group Co. dollar bond also rose.

China’s debt-saddled developers have seen their offshore bonds lose $82 billion in value, and more losses and defaults are likely, analysts at Bloomberg Intelligence said.

Key Developments:

  • China’s Spreading Property Contagion Adds Pressure on Xi to Ease
  • Chinese Developer Agile Downgraded Further Into Junk at S&P
  • China’s Property Sector Contraction Worsens in Blow to Economy
  • China Developers Rise on Pudong Bank’s Plans to Fund M&A Loans
  • Country Garden Dollar Bonds Jump After Monday’s Record Selloff
  • China Aoyuan 2023 Bond Set for Best Gain in 2 Months
  • Logan Group Buys Back 1m Shares for HK$5.5m Jan. 17
  • Country Garden Buys Back $10m of 2022 and 2026 Notes

China’s Spreading Property Contagion Adds Pressure on Xi to Ease (12:24 p.m. HK)

Financial contagion is roaring back in China’s property industry, putting renewed pressure on Xi Jinping’s government to do more to insulate the stronger developers.

While panic seemed to ebb on Tuesday, with bonds and shares paring some of the previous day’s losses, analysts expect the situation to worsen unless Beijing acts to improve the industry’s access to funding.

Chinese Developer Agile Downgraded Further Into Junk at S&P (12:12 p.m. HK)

Agile Group’s long-term rating was downgraded by S&P to B+ from BB- as it faces sizable near-term debt maturities with “limited” refinancing options.

Agile could manage such maturities with cash generated from sales and asset disposals, but the margin of error on execution is reducing, S&P said. Its outlook remains negative on the back of worsening liquidity over the next 12 months.

Separately, Agile Group said it bought back a further $10 million of its 6.7% senior notes due on March 7.

Country Garden Dollar Bonds Jump After Monday’s Record Selloff (11:56 a.m. HK)

Country Garden’s dollar bonds reversed some of Monday’s record declines with credit traders highlighting $10 million of repurchases by the developer. The gains came amid a broader advance for Chinese developers’ securities. Its 6.5% note due 2024 jumped 4.5 cents on the dollar to 74.9 cents as of 11:48 a.m. in Hong Kong, Bloomberg-compiled prices show.

China Fallout May Impact LGFVs, Metals Sectors: CreditSights (11:01 a.m. HK)

A worsening debt crisis in China’s property industry could hit weaker financial institutions, LGFVs, metals producers or the consumer sector, CreditSights warned in a report.

“The market turmoil so far has been severe but largely confined within the China property sector,” it said. “If the situation deteriorates and widespread numbers of developers capitulate, this could spill over into several other sectors” and many Chinese dollar bonds “would effectively become uninvestable.”

Higher-Rated China Developers’ Climb Following Monday’s Rout (10:12 a.m. HK)

Higher-rated Chinese developers’ dollar bonds rebounded early Tuesday, with some notes on pace for their biggest gains in two months following record price declines a day earlier.

China’s Property Sector Contraction Worsens in Blow to Economy (10:11 a.m. HK)

China’s property industry shrank at a faster pace in the final three months of last year as the housing slump continues to take its toll on the economy.

Output in the real-estate sector shrank 2.9% in the fourth quarter after a 1.6% contraction in the previous three months, the National Bureau of Statistics said — the first consecutive quarterly decline since 2008.

China Developers Rise on Pudong Bank’s Plans to Fund M&A Loans (9:57 a.m. HK)

Shares of some Chinese real estate developers gained as Shanghai Pudong Development Bank plans to use part of its bond proceeds for property project acquisition loans.

A Bloomberg Intelligence gauge of developers rose as much as 0.8%, snapping a four-day drop, with Shimao Group up 3.7%, Country Garden up 3% and China Evergrande rising 0.6%.

Country Garden Dollar Bonds Jump After Monday’s Record Selloff (9:36 a.m. HK)

Country Garden dollar bonds reversed some of Monday’s record declines with some credit traders highlighting $10 million of repurchases the developer disclosed. Its 6.5% note due 2024 jumped 3.5 cents on the dollar to 73.9 cents as of 9:28 a.m. in Hong Kong, Bloomberg-compiled prices showed.

Pudong Bank to Use Part of Bond Proceeds for Property M&A Loans (8:27 a.m. HK)

Shanghai Pudong Development Bank planned 30 billion yuan sale of three-year financial bonds in the domestic market, with part of the proceeds to be used as property project acquisition loans, according to a statement on Chinabond.com.cn.

The bond is the first from a financial institution to fund loans for property M&A, the China Securities Journal said. The move is aimed at easing stress in the struggling property industry after some state-owned developers proposed bond sale plans to buy property assets.

The state-run Securities Times reported in December that regulators would favor the issuance of notes to finance property-related deals, citing a meeting between the National Association of Financial Market Institutional Investors and developers.

Bond Losses Pass $82 Billion; May Rise More If China Doesn’t Act (6:06 a.m. HK)

The market capitalization of China property’s offshore bonds has dropped from $151 billion of par value to $69 billion of market value, indicating more than $80 billion in investor losses, Bloomberg Intelligence credit analyst Andrew Chan wrote in a note. This excludes losses from onshore bonds.

If China refrains from aggressively easing property policy, more losses and defaults could be coming, he said. Should a developer with a national footprint run into trouble, home buyers worried that projects may not be completed could end up avoiding purchases from all private property firms.

China’s Property Developers Face Contagion Risks, BI Says (6:03 a.m. HK)

China’s debt-saddled private property developers face growing risks of a liquidity crunch, with home buyers and bondholders’ shattered confidence raising the specter of broader financial contagion, Bloomberg Intelligence real estate analysts Patrick Wong and Kristy Hung wrote in a note.

Some companies may take a cue from Guangzhou R&F Properties Co. by extending debt terms or taking a haircut on portions. Companies may also follow Sunac China Holdings Ltd. and Shimao Group Holdings Ltd. with equity placements at ultra-low valuations and deep discounts, they said.

Top state-owned developers such as China Overseas Land & Investment Ltd. and China Resources Land Ltd., with balance sheets exceeding $1 trillion, could be well-positioned for M&A as they buy from distressed, private-sector competitors at fire-sale prices.

Logan Group Buys Back 1m Shares Jan. 17 (5:36 a.m. HK)

Logan Group Co. bought back shares for HK$5.5 million ($706,000), paying HK$5.47-HK$5.86 per share, it said in a statement to the Hong Kong stock exchange Monday evening. The company bought 3 million of its shares for HK$17 million on Jan. 14.

Country Garden Buys Back $10m of 2022 and 2026 Notes (5:28 a.m. HK)

Country Garden Holdings Co. bought back an aggregate principal amount of $5 million of its 4.75% notes due July 2022 and $5 million of its 7.25% notes due April 2026, according to a statement to the Hong Kong stock exchange late Monday.

The repurchased notes will be canceled and the company will monitor markets for further bond buying.

© 2022 Bloomberg

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