CHINESE developer Greenland Holding Group said on Monday (Oct 31) that it will likely default on a dollar bond, adding to mounting distress in an industry beset by a debt crisis that's dragged notes to record lows.
The Shanghai-based developer, which is partially owned by local government entities and had long been considered among the nation's most resilient, said in a filing that the issuer and guarantor wouldn't be able to repay the US$362 million outstanding on the note, which matures Nov 13.
"Faced with the sudden and serious impact of the Covid-19 situation in Shanghai earlier this year and the impact of sporadic local outbreaks of Covid-19 across the PRC, coupled with the negative market conditions, the Group has been experiencing significant declines in its sales and operations, which in turn affected the Group's financial condition, in particular its cash flow and liquidity," it said in the statement.
An event of default is likely to occur on the bonds due in November as a result, it said. Greenland is also seeking to extend the maturity of the June 2023 note by one year and other bonds by two years.
China's junk dollar bond market has just suffered one of its worst ever months with losses of about 11 per cent in October. The development with Greenland threatens to exacerbate an already bad start to the week. Its problems stretch back to May, when the builder first shocked traders with a surprise bond delay plan, in a sign of debt contagion spreading from private developers to those with state links.
It was subsequently downgraded to selective default by S&P Global Ratings after it completed the extension. But the company then paid back a dollar bond due in August after it received funding support from state-owned shareholders.
The developer is also asking noteholders to consent to amendments and waivers relating to nine outstanding dollar bonds guaranteed by the company, according to the filing to the Hong Kong stock exchange. The company has hired Bank of China International and CITIC Securities as its solicitation agents, it said.
Greenland's dollar bond due November posted its worst-ever daily drop Monday, plunging 42 US cents to 45.9 US cents on the dollar as of 5.55 pm in Hong Kong, according to Bloomberg-compiled prices. The note was trading at 88 US cents on the dollar just last week. Its other longer-ended dollar bonds are trading at distressed levels of around 20 US cents. BLOOMBERG