Shimao seeks repayment extension on US$947m in trusts

[BEIJING] Shimao Group Holdings, a bellwether for financial contagion in China's embattled property industry, is seeking to extend repayment on about US$947 million of high-yield trust products over three years, according to people familiar with the matter.

Shimao told investors on Wednesday that it has about 1.3 billion yuan (S$275.6 million) of these short-term investments due this month and 4.7 billion yuan maturing between April and August, said the people, asking not to be identified discussing a private matter.

The developer proposes to repay 25 per cent of the principal in 2022, 35 per cent next year and the rest in 2024, the people said. The products were issued through Citic Trust, the nation's largest trust firm.

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.

Long considered one of the healthier builders, Shimao Group had until recently appeared largely unscathed even as junk-rated rivals including China Evergrande Group and Kaisa Group Holdings defaulted. Shimao and Citic didn't immediately respond to requests seeking comment.

Dollar bonds sold by Shimao - which builds residential and commercial properties and is among the largest debt issuers in China's real estate sector - have plunged for three days. The firm's 5.2 per cent dollar note due 2025 fell 3.4 cents to 43.2 cents Wednesday in Hong Kong, according to Bloomberg-compiled data.

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 on Dec 25. The trust firm had demanded early repayment after the developer failed to meet installment requirements.

Trust products are high-yielding, short-term instruments that had been pitched to wealthy Chinese residents and institutions as safe and predictable investments.

Developers have to repay more than US$22 billion of these investment products this quarter, and US$90 billion for the full year, according to data tracker Use Trust. The data covers trusts sold to retail investors and excludes so-called single trusts, which are issued privately and make up the bulk of developer financing through the products. Crucially, the data doesn't say which company is on the hook for each trust.

On top of trusts, looming bond payments are likely to keep investors on edge. Chinese developers need to repay some US$7.7 billion in offshore bonds in the first quarter, according to data compiled by Bloomberg. Shimao was China's 28th-biggest developer by contracted sales last year and has about US$10 billion in outstanding local and offshore bonds.

With borrowing costs for Chinese junk-rated dollar bonds hovering at about 20 per cent, yields remain too high for most builders that need to refinance maturing debt. BLOOMBERG