China’s Huafa gains ‘full support’ of local government amid bond selloff

[SHANGHAI] China’s Zhuhai Huafa Group has received funding from its local government, which has given the troubled conglomerate its “full support”, the 21st Century Business Herald reported on Thursday (Nov 5), citing a senior Zhuhai city official.

Chinese media reported last week that Guangdong province-owned Huafa, whose businesses include real estate and urban development, failed to repay two maturing trust products and was seeking extensions on some bank loans.

That led to a sharp selloff in its bonds and shares on Friday, which also hit the wider Chinese corporate and government bond market.

Numerous Chinese property firms have defaulted on their debt or have had to restructure payments amid a liquidity crisis that has engulfed the sector since 2021.

Huafa’s credit woes are, however, notable because it is a state-owned enterprise, a category of developer that had been widely regarded as more insulated from the crisis.

Zou Hui, director of the Zhuhai State-owned Assets Supervision and Administration Commission, told the newspaper in an interview that the city has delivered more than 40 billion yuan (US$6 billion) in funding to Huafa and plans to coordinate 70 billion yuan more in financing.

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“We have the confidence and determination to jointly respond well to the current challenges,” Zou was quoted as saying.

Huafa Group chairman Guo Jin said in the same interview that the company has over the past week repaid the principal and interest on several bonds on time.

The company is also accelerating property sales and will liquidate idle land assets, Guo said, adding that diversified businesses including property services and tourism projects were generating stable cash flow.

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The company and the Zhuhai city government did not offer immediate comment when contacted by Reuters.

Zhuhai Huafa’s onshore bond due in 2029 rebounded 17 per cent to 85 yuan in early trade on Thursday but remains below levels of about 100 yuan last week.

Huafa Properties, the group’s listed real estate unit, jumped roughly 5 per cent in early trade on Thursday but remains down 25 per cent over the past 30 days.

China Lianhe Credit Rating said on Wednesday that it had placed the group on a negative watch list, citing its persistent losses and a sharp decline in its ability to generate cash from operations. REUTERS