China state-backed developers Greenland, Sino-Ocean in debt payment trouble
CHINA state-backed developer Greenland Holdings has defaulted on a dollar bond worth US$432 million due to a missed amortisation payment, according to sources familiar with the matter and a document viewed by Reuters on Wednesday (Jul 19).
The default adds to the debt woes plaguing the Chinese property sector, as more liquidity troubles have emerged in the past few weeks despite policy support.
Once a key growth driver, the real estate sector is now a significant drag on the cooling economy, spilling over into everything from construction to flagging consumer confidence and retail sales.
Problems at state developers in particular could signal more defaults among private developers in the second half, as the debt crisis that unfolded in mid-2021 shows little signs of stabilising.
Another state-backed developer, Sino-Ocean Group, has initially proposed to creditors to extend the principal repayment of a two billion yuan (S$367.2 million) onshore bond due Aug 2 by one year, two sources with direct knowledge of the matter said on Wednesday.
Beijing-based Sino-Ocean is the second state developer to extend its onshore bond payment. The firm suspended trading in the bond in question from Tuesday because of ongoing repayment negotiations with creditors.
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The market is watching whether it will be able to repay an offshore coupon due later this month.
Shanghai-based Greenland, the first state-backed developer to extend debt payments last year, has failed to make a payment for the 6.75 per cent June 2024 bond with an outstanding US$432 million.
HSBC, the trustee for the bond, notified holders on Jul 14 of an event of default because the developer did not pay the 5 per cent amortisation worth US$22.5 million on due day, and the non-payment continued for the next seven days, according to Debtwire, which first reported about the default.
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Late last year, the developer extended the maturity of the bond in question by another year, and a series of other bonds by two years. It promised to pay 5 per cent of the principal on the original maturity dates, together with interest.
Greenland said it is in active communications with various parties, without elaborating further.
Sino-Ocean said it will publish details in future statements.
Two sources said Sino-Ocean has proposed to pay only interest on the maturity date of the onshore bond in question, then four instalments of 5 per cent of the principal each from September, and complete the remaining 75 per cent after one year.
Bond prices in the sector slumped further this week on a string of negative news.
Shui On Land asked some bondholders this week to agree to disclose their identities for the purpose of constructing a bondholder identification list, one bondholder said.
On Tuesday, Bloomberg News reported that the developer had engaged Morrow Sodali to identify bondholders of the bonds due November 2023 and August 2024.
Responding to the move, Shui On said in a statement that it is part of an investor relations exercise to better understand how its bond investor base has changed, in order to enhance engagement.
It added that it selected the two bonds because they are the largest in size, and issuance times were more dated than those of the others.
Bloomberg also reported that Dalian Wanda Commercial Management Group, the services arm of China’s biggest commercial property developer, Dalian Wanda Group, had told some creditors that it was still raising money for a US$400 million bond payment due later this month.
China Evergrande Group, the world’s most indebted property developer, posted a combined loss of US$81 billion in 2021 and 2022, and a rise in total liabilities in its long overdue results on Monday.
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