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Land sales slide; Fitch withdraws ratings: Evergrande update

A sign that a housing slump is crimping government finances.
Image: Andrea Verdelli/Bloomberg

The income that local authorities in China get from land sales slid in the first quarter, a sign that a housing slump is crimping government finances.

Fitch withdrew its ratings on three more Chinese developers, highlighting ongoing transparency issues that may curtail further gains for stocks and dollar bonds in the sector. A gauge of developer shares was little changed after three consecutive days of losses.

Elsewhere, two holders of Sunac China Holdings Ltd.’s 2023 dollar bond with interest due Tuesday said they had yet to receive it as of 3 p.m. Wednesday, a week after the Chinese developer failed to meet the initial deadline on another offshore coupon payment.

Key Developments:

  • China’s Local Land Sales Revenue Tumbles 27% in First Quarter
  • China Regulator Urges Banks, Insurers to Support Road Projects
  • China Developers Extend Fall After Lending Rates Kept Unchanged
  • Ex-PBOC Official Urges Easing Property Crackdown During Outbreak
  • Chinese Banks Hold Lending Rates Despite PBOC Calls for Easing
  • Several Chinese Cities Ease Housing Loans, Down Payment: Daily

Unigroup Case Flags China Remittance Risks for Foreign Investors (10:11 a.m. HK)

Investors in one of China’s major distressed-debt cases face a new worry beyond defaults and bond restructurings: payments being able to leave the country.

Bloomberg reported earlier this week that Tsinghua Unigroup Co., a linchpin of China’s race for advanced technology that began defaulting in 2020, plans to repay offshore dollar bondholders’ recovery funds in yuan given the restructuring process is a domestic court procedure. The company also asked the trustee, Citicorp International Ltd., to provide an onshore account for that.

That prompted the trustee to caution there’s no assurance it will be able to receive or remit funds offshore as government approval is required. Underscoring the element of confusion, the trustee said its representative had sought clarity on which regulations restrict payment of the funds to offshore accounts and hadn’t been able to get such information as of last week when it sent letters to investors.

Ratings Withdrawals Bad News for China Property Investors (9:53 a.m. HK)

Fitch withdrew its ratings on three more Chinese developers, highlighting ongoing transparency issues that may curtail further gains for stocks and dollar bonds in the sector.

The firm separately announced the moves involving Sunac, Shimao Group Holdings Ltd. and Logan Group Co. on Wednesday, saying the trio stopped participating in the ratings process. They were downgraded a combined five times in March by Fitch, moving them all below the single-B range.

China’s Local Land Sales Revenue Tumbles in Q1 (8:10 a.m. HK)

Revenue in the first three months of 2022 from selling rights to use state-owned land fell 27.4% from the same period a year ago to 1.2 trillion yuan ($187 billion), according to Ministry of Finance data released Wednesday. That drop follows the biggest sales slump on record for the first two months of 2022.

The slide poses a test for cash-strapped local authorities, who rely on land as a source of income yet already face pressure to bolster economic growth by cutting taxes and spending more on infrastructure.

Sino-Ocean Green Bond a Positive for Developers: Nomura (8:02 a.m. HK)

The green dollar bond – backed by a standby letter of credit – being marketed by Sino-Ocean is positive for debt refinancing in China’s property sector, especially if some other higher-rated Chinese developers follow with their own deals, says Nomura.

Chatter about such issuances by developers started last month, and state-backed Sino-Ocean is the first deal to emerge since, according to Chen.

Sunac Bondholders Say They Haven’t Received Interest Due Tuesday (4:15 p.m. HK)

Two holders of Sunac’s 2023 dollar bond that had interest due Tuesday said they had yet to receive it as of 3 p.m. Wednesday, a week after the Chinese developer failed to meet the initial deadline on another offshore coupon payment.

The amount due Tuesday was $26.85 million, according to data compiled by Bloomberg. The firm has a separate $20.4 million coupon due Wednesday on another dollar bond.

Both interest payments have 30-day grace periods before an event of default could occur, according to the bonds’ offering circulars. The holders asked not to be identified because they’re not authorized to speak about the matter.

© 2022 Bloomberg

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