China developer Shimao Group seeks ABS extensions; shares, bonds sell off

[SHANGHAI] Chinese developer Shimao Group's default on a trust loan payment and efforts to delay payments on asset-backed securities sent its shares and bonds tumbling on Friday (Jan 7), underscoring the continued stress in China's property sector.

Shimao Group's unit Shanghai Shimao Construction has proposed extensions on maturities for 2 asset-backed securities (ABS) due this month totalling 1.17 billion yuan (U$183.50 million), 3 sources with knowledge of the matter told Reuters.

The proposals would see the company repay 10 per cent of the principal in Jan, 5 per cent each month from Feb through Nov, and the remaining 40 per cent in Dec, the 3 sources said.

1 of the sources said that the company and ABS holders were currently in negotiations, but that the proposals were not likely to meet with approval from holders without credit enhancements.

"If the negotiations are not successful it will trigger cross-default clauses involving other bonds," the source said.

Shimao declined to comment.

News of attempts to delay ABS maturities, first reported by financial news provider REDD, comes a day after a trust company, China Credit Trust, said that Shimao had defaulted on a loan after missing a 645 million yuan payment.

Shanghai Shimao Construction said in a filing on Friday that it was in talks with China Credit Trust to resolve the outstanding payment, and that the missed payment would not accelerate payment requests in the open bond market.

Shimao's Group's Hong Kong shares plunged more than 18 per cent shortly after trading began Friday on investor concerns over the company's liquidity stress. They were down more than 7 per cent at .

Shanghai exchange-traded bonds issued by its unit Shanghai Shimao Co tumbled more than 20 per cent, triggering trading pauses over what the Shanghai Stock Exchange said was "abnormal fluctuations".

3 additional Shanghai Shimao bonds fell between 13 per cent and 14 per cent on Friday morning, exchange data showed. The 6 bonds were quoted at distressed levels of 40 per cent to 60 per cent off their face value.

REUTERS