Home sales slump; another bond deadline looms for Evergrande Group

[BEIJING] China Evergrande Group faces another key bond payment deadline on Saturday, part of more than US$2 billion coming due at China's stressed property developers this month as an industry slump persists.

Home sales for major builders tumbled 32 per cent in October from a year earlier, according to China Real Estate Information Corp. That may exacerbate a cash crunch as the government seeks to curtail leverage in the property sector and bond refinancing becomes increasingly difficult.

Evergrande unit Scenery Journey Ltd has US$82.5 million in coupons on two dollar bonds coming due on Nov 6. Last week, Evergrande's bondholders received an overdue interest payment shortly before the expiry of a grace period, buying more time for the debt-stricken company to raise cash from asset sales.

Yango Group Co's onshore bonds tumbled and were later halted Monday after the developer said it is seeking to extend some dollar notes to avoid default. A surge in Chinese junk dollar bond yields in October has made it all but impossible for stressed developers to roll over their maturing debt. At least four builders defaulted last month, as the country's credit market undergoes its biggest shakeout in years.

Still, the banking system has so far managed to shrug off the property industry slump. China's biggest state-run banks extended their earnings recovery in the third quarter, fuelled by rising credit demand and improving asset quality, results showed last week. Banks are likely to further cut their proportion of loans to the real estate sector, the central bank-run Financial News said Monday.

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