SUNAC China Holdings Ltd has defaulted on a greenback bond, changing into one of many greatest Chinese property corporations to renege on its obligations amid a record-breaking wave of missed funds.
China’s fourth-largest developer says in a submitting to the Hong Kong inventory change that it didn’t pay a US$29.5mil (RM129.74mil) coupon on the observe earlier than the top of a grace interval Wednesday and that it doesn’t count on to make funds on different securities.
Home gross sales have been considerably affected by the latest Covid-19 outbreak in China, and that’s worsened the corporate’s liquidity constraints, it says.
Sunac appointed authorized and monetary advisers to assist assess the agency’s capital construction and liquidity, in line with the submitting.
China’s property sector has been grappling with a debt crisis since final yr, following a nationwide crackdown on extreme leverage and a string of defaults.
More than a dozen builders have missed offshore observe funds, together with big China Evergrande Group.
High-yield greenback bonds from Chinese issuers – the majority of which come from property corporations – are extending losses after dropping for a file eight straight months via April.
“The extent of this has spread up the chain and has been a big surprise for the market,” says Sheldon Chan, portfolio supervisor for Asia credit score bond technique at T Rowe Price.
“Going into the cycle you may have been expecting 20% to 30% of developers defaulting, but now we are talking about more than 60% or 70% of the market being priced under 60 US cents (RM2.64) on the dollar, where the implied default rate is very high.”
Sunac is the most important developer to default on a public bond fee this yr.
The growth is fuelling considerations a few new wave of debt failures amongst actual property corporations that till simply a number of months in the past have been thought of safer debtors.
Some of Sunac’s greenback bonds have been indicated above 80 cents (RM3.52) on the greenback as just lately as February. They’re now under 30 cents (RM1.32).
“We are concerned that the event may be a prelude to a fresh wave of defaults among weak private developers that are teetering on the brink,” says Leonard Law, senior credit score analyst at Lucror Analytics.
“These developers’ cash crunch has been exacerbated by poor contracted sales amid China’s lockdowns.”
Sunac missed an preliminary deadline final month for the coupon fee on its 7.95% greenback bond maturing 2023, and had a 30-day grace interval that expired Wednesday.
The default might set off cross-default on different offshore debt, the observe’s prospectus reveals.
The fee in query was the primary of 4 dollar-bond coupons initially due in April however which holders have instructed Bloomberg News weren’t paid.
Nearly all of this yr’s public-bond defaults amongst Chinese issuers have been by builders.
Many others within the sector have exchanged or prolonged debt to be able to protect money amid the home-sales weak point and corporations’ incapacity to refinance offshore debt.
Sunac has been within the highlight for months. It has US$7.7bil (RM34bil) of greenback bonds excellent – among the many highest for Chinese builders, in line with Bloomberg-compiled information.
Its shares and greenback bonds have plunged some 80% since September, when a subsidiary’s letter to a neighborhood authorities requesting “special policy support” grew to become public.
In Thursday’s submitting, Sunac mentioned that given its liquidity constraints, there’s no assurance it “will be able to meet its financial obligations when due or within the relevant grace periods.”
Not paying when required or reaching a well timed decision with collectors “may result in the acceleration of relevant financial obligations or taking of enforcement actions,” it mentioned. — Bloomberg
