Shimao misses payment as US$948m debt talks drag on

[BEIJING] Shimao Group Holdings missed some trust payments and hasn't reached an agreement to extend repayments on about US$948 million of high-yield products with the nation's largest trust firm.

The builder didn't make payments for principal and interest on a portion of the trust products that came due last week, according to a statement to investors from Citic Trust that was seen by Bloomberg. The trust firm said it hasn't reached an extension agreement with Shimao and it will continue to urge the builder to repay, according to the statement. It's not clear if the product has a grace period. Spokespeople for Citic Trust and Shimao declined to comment.

Shimao - which builds residential and commercial properties and is among the largest debt issuers in China's real estate sector - last week told investors that it has about 1.3 billion yuan (S$276.4 million) of these short-term investments due this month and 4.7 billion yuan maturing between April and August, according to people familiar with the matter, who asked not to be identified discussing a private matter.

Shimao's dollar bond due July fell 2.7 cents on the dollar to 61.5 cents Wednesday afternoon in Hong Kong, set for its biggest drop in four days, Bloomberg-compiled prices show.

China's property industry has been rocked by a string of defaults by major developers, following a government crackdown on excessive borrowing and speculation in the housing market.

Shimao has become a bellwether for financial contagion in China's embattled property industry after it came under pressure to pay its debt in recent months after being long considered one of the healthier builders.

While Shimao said it has had no defaults in the open market last month, it remains exposed to trust loans - high-yielding, short-term instruments that had been sold to wealthy Chinese residents and institutions.

Chinese publication Cailian reported that there was no agreement on a repayment extension late Tuesday. Shimao suffered its biggest-ever bond rout last month after China Credit Trust said a unit of the developer failed to pay 645 million yuan of a 792 million yuan loan due by Dec 25.

The trust firm had demanded early repayment after the developer failed to meet installment requirements. BLOOMBERG