Shimao plans to repay yuan bond due on Saturday after cash inflow

[SHANGHAI] Shimao Group Holdings is set to repay a local bond maturing on Saturday after the embattled Chinese developer received higher-than-anticipated cash inflows from property sales in December, according to people familiar with the matter.

Onshore subsidiary Shanghai Shimao has set aside funds to repay the 4.65 per cent local bond with outstanding principal of US$300 million, said the people, who asked not to be identified as the matter is private.

The company plans to wire money ahead of the due date, the people said. Part of the liquidity comes from cash proceeds from property sales, which exceeded expectations in December after banks accelerated mortgage approvals, according to the people. Shimao declined to comment on its payment plans and cash inflows when contacted by Bloomberg on Tuesday, referring instead to its regulatory filings.

Shimao is among developers facing stress following a government crackdown on excessive borrowing and speculation in the housing market. The payment plan comes after Shimao's credit ratings - which until recently were investment grade - were cut on mounting concerns over its financial health. Shimao needs to repay or refinance some US$392.6 million in bond maturities and coupons that come due this month, Bloomberg-compiled data show.

Fitch Ratings became the latest credit rating company to downgrade Shimao on Tuesday, citing its "lower margin of safety in preserving liquidity." Long considered one of the healthier builders, Shimao's stumble in recent weeks has stood out in a credit market already stung by debt failures at firms including China Evergrande Group.

Last week, a creditor said a separate Shimao unit missed a payment on its trust loan, while the developer said it has no debt defaults in the open market and the matter won't trigger investor demands for early bond repayment.

Shimao is trying to sell assets to reduce its debts. It's in talks with potential buyers and may consider selling certain properties if the terms are appropriate, it said Tuesday.

China's top leaders have signalled an easing of their clampdown on the real estate to bolster home sales, starting with supporting mortgages.

BLOOMBERG