China’s fourth-largest developer by sales is approaching a possible default as the sector’s liquidity crisis shows no sign of easing despite government vows of support. Some of Country Garden Holdings Co.’s dollar bonds were poised for their biggest drops in two months.
Sunac China Holdings Ltd.’s grace period to make a dollar-bond interest payment ends Wednesday, according to data compiled by Bloomberg. Failure to do so could trigger cross-default on other offshore debt, the bond’s prospectus shows.
Country Garden led bond declines as the country’s biggest developer said restrictions imposed by a southern city had been removed after customer complaints were addressed. Chinese high-yield bonds dropped 1 to 2 cents on the dollar, according to credit traders. A gauge of developer shares dropped 2.5% in Hong Kong, joining a wider sell-off.
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Country Garden Bonds Post Largest Drop Since March (9:30 a.m.)
Country Garden’s dollar bonds fell sharply Tuesday, with some on early pace for their largest declines since March, after the developer faced temporary restrictions in a southern city.
Country Garden’s 8% note due 2024 dropped 6.2 cents on the dollar to 76.5 cents as of 9:13 a.m. in Hong Kong, according to Bloomberg-compiled data. The stock fell as much as 14%.
The firm said the measures imposed by regulators in Fuzhou city were removed.
Sunac Is Running Out of Time for Payment (8 a.m. HK)
Sunac’s 30-day grace period to make a $29.5 million dollar-bond interest payment ends Wednesday. The company has $7.7 billion of dollar notes outstanding.
The developer had three other coupons initially due last month which bondholders have told Bloomberg News weren’t paid by their initial due date. In June, a $600 million note matures. Sunac has also been struggling with onshore debt, recently getting bondholder approval to repay a 4 billion yuan ($594 million) note over 18 months.
Here’s a table of coupon and principal amounts coming due:
|Dollar bonds||Due date||Amount (million)||Grace period ends|
|7.95% due 2023||April 11||$29.5||May 11|
|8.35% due 2023||April 19||$26.85||May 19|
|6.8% due 2024||April 20||$20.4||May 20|
|5.95% due 2024||April 26||$28||May 26|
|7.25% due 2022||June 14||$621.75||N/A|
With nearly all Sunac offshore bonds now below 30 cents on the dollar, “most investors have already anticipated the default risks,” according to Amy Kam, senior portfolio manager at Aviva Investors Global Services Ltd. Still, a missed payment “could reinforce the message that stress in developers runs deep and the policy crackdown was too much and too quick.”
Shimao Seeks Payment Extension (7:39 a.m. HK)
Shimao’s key onshore unit Shanghai Shimao Co. is seeking to delay paying principal on a 500 million yuan note due May 22 for a year, according to a Shanghai exchange filing late Monday.
Shanghai Shimao will arrange a meeting with investors, the firm said, adding that the delay doesn’t amount to a default event.
Sunshine 100 Says Auditor KPMG Resigns (7:15 a.m. HK)
Auditor KPMG has resigned with effect from May 7, Sunshine 100 China Holdings Ltd. said in an exchange filing.
KPMG said that during its risk assessment in relation to the audit of Sunshine 100’s consolidated financial statements for the year ended December 2021, it identified a number of matters requiring explanations and supporting documents. The developer hasn’t yet provided the requested information.