China developers confront a US$197b challenge in January
[HONG KONG] China's property developers have mounting bills to pay in January and shrinking options to raise necessary funds.
The industry will need to find at least US$197 billion to cover maturing bonds, coupons, trust products and deferred wages to millions of migrant workers, according to Bloomberg calculations and analyst estimates. Beijing has urged builders like China Evergrande Group to meet payrolls by month-end in order to avoid the risk of social unrest.
Policy for the property market remains tight even after China in December pivoted towards supporting economic growth. Future focus is likely to be on ensuring homes are delivered, and the country's central bank is encouraging financial firms to help acquisition activity in the real estate sector. Bond payments for stressed firms are larger this month than November and December combined.
Calculations of January's bill include:
Worker wages: 1.1 trillion yuan (S$233.5 billion), estimate according to Nomura Holdings economists
Dollar bonds: US$6.04 billion in principal payments and US$1.7 billion in coupons, according to data compiled by Bloomberg
A NEWSLETTER FOR YOU
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
Onshore notes: 37.2 billion yuan in principal payments and 6.6 billion yuan in coupons, Bloomberg-compiled data show
Trust products: 60.2 billion yuan come due, according to data tracker Use Trust
There are also interest payments on local and offshore bonds, bills to suppliers and potential hidden debt. For smaller or struggling firms it is unclear where the cash will come from. Yields have been so elevated offshore that the US dollar bond market remains effectively shut for refinancing, a situation that HSBC Holdings analysts predict will continue for at least another 6 months.
Only a handful of the strongest private-sector builders have recently tapped the interbank credit market onshore, while low stock valuations limit the scope for equity financing.
Generating higher revenue from a weakening property market remains a challenge. Also, companies like Evergrande have struggled to sell non-core assets.
BLOOMBERG
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Property
HDB resale prices up 1.8% in Q1; rental market slows down
Singapore’s private home prices up 1.4% in Q1, rents drop by 1.9%: URA
OUE wins tender to lease, develop new ‘zero-energy’ hotel at Changi Airport’s T2
Singapore office rents in central region fall 1.7 per cent in Q1 over Q4: URA
Homebuyers shun new real estate in Vancouver, hurting builders
US pending home sales jump in March to hit highest in the year