Chinese developer Xinyuan averts default, loan curbs loosen

[SHANGHAI] A Chinese real estate developer avoided a default on a maturing dollar bond on Friday, as China's homebuilders struggled with the spreading impact of a debt crisis at China Evergrande Group, the world's most indebted developer.

Xinyuan Real Estate's bondholders had agreed to an offer to accept new bonds and cash in exchange for maturing notes, the developer said in a filing to the Singapore Exchange on Friday.

Xinyuan said that holders of more than 90 per cent of the company's US$229 million notes due Oct 15 had agreed to the exchange, which would see it deliver new bonds worth US$205.4 million and US$19.1 million cash.

Xinyuan's 14.5 per cent September 2023 bond crashed nearly 30 per cent on Friday to trade at 58.35 cents, according to data provider Duration Finance.

The agreement follows warnings from other developers that they could default on their bonds, while still others have taken steps to delay payments in the wake of Evergrande's troubles.

China's No 2 developer, with more than US$300 billion in liabilities and 1,300 real estate projects in over 280 cities, missed a third round of interest payments on its international bonds this week.

Chinese developers face more than US$500 million in coupon payments on their high yield bonds before the end of this month.

Refinitiv data show coupon payments by Kaisa Group Holdings and Fantasia Holdings are due this weekend.

In a sign that authorities may be trying to curb the impact of developers' debt woes, Chinese regulators have told some major banks to accelerate mortgage approvals in the fourth quarter, Bloomberg reported Friday, citing unidentified sources.

Lenders were also allowed to seek permission to sell assets backed by residential mortgages in order to free up more loan quota, the news agency said.

The PBOC and the China Banking and Insurance Regulatory Commission (CBIRC) did not immediately respond to Reuters requests for comment.

Apart from Xinyuan, Duration Finance data showed other developers' bonds deepening their rout on Friday. Sinic Holdings Group's 10.5 per cent June 2022 bond dived more than 20 per cent to just 12.25 cents, and Ronshine China Holdings' February 2022 bond fell more than 6 per cent to 68.35 cents.

Spreads on Chinese high-yield corporate dollar bonds touched a fresh record late Thursday evening US time, having nearly tripled since late May, while investment-grade spreads remained near their widest in more than two months.

Worries of contagion have also hit property developers'shares this week. On Friday, an index tracking A-shares in the sector gave up small gains to end down 0.1 per cent, lagging a 0.38 per cent gain in the blue-chip index and taking losses since Tuesday to 4.5%.

China has been ramping up property market curbs since late 2020, introducing new measures to closely monitor and control the debt levels of developers.

But with economic growth cooling and new construction starts slowing, speculation has been rife over whether it would start relaxing those restrictions, as was done during past downturns.

Chinese leaders, fearful that a persistent property bubble could undermine the country's long-term ascent, are likely to maintain tough curbs on the sector but could soften some tactics as needed, policy sources and analysts told Reuters this week.

Yi Gang, governor of the People's Bank of China, told 24 financial institutions last month to "maintain the steady and healthy development of the real estate market and safeguard the legitimate rights and interests of housing consumers."

Chinese regulators, who want to impose financial discipline while avoiding social unrest, have taken targetted measures such as asking state-backed firms to pick up Evergrande assets to ease its liquidity situation.

REUTERS