Evergrande crisis: a third of China's developers may face pressure with US$84 billion in debt maturing by end of 2022, S&P warns

Asia's Tech News Daily

China’s property developers, China Evergrande Group, averted a default last week, US$37 billion in total borrowings, Fantasia Holdings Group, Modern Land (China), Sinic Holdings Group, concerns over its off-balance debts, issued by Evergrande

A third of China’s property developers could see their liquidity “acutely strained” in the worst case scenario as weaker sentiment and new government regulations weigh on their funding sources, with a “real” risk of default as some US$84 billion in debt is set to mature by the end of next year, according to S&P Global Ratings.

The credit rating company said that more than half of its rated portfolio of Chinese property developers are “most at risk” under such a scenario as their bonds are rated as junk, from “B-” to “B+”, or two levels below investment grade.

“The entities have also made heavy use of funding via joint ventures and trust loans, given they have been largely shut out of more conventional funding,” S&P analysts Matthew Chow and Aeon Liang said in a research note. “New regulations and weak sentiment are squeezing these capital channels.

“The idea that entities may be abruptly deprived of such funding, threatening refinancing plans and potentially triggering defaults, is a large part of our scenario analysis.”

Concerns are rising about the high level of debt carried by China’s developers as a massive liquidity crisis at China Evergrande Group, the mainland’s biggest home builder by sales, has spooked financial markets.

Evergrande, the world’s most indebted developer, missed a series of interest payments on its offshore debt in September and October as it strains under more than US$300 billion in total liabilities and faces a difficult combination of government regulations restricting borrowing by overburdened developers and weakening property sales.

The Shenzhen-based developer averted a default last week after it wired a missed payment on a US$2.03 billion bond just ahead of the expiration of a 30-day grace period. Failing to make the payment would have triggered cross-defaults on much of its onshore debt.

However, Evergrande is far from out of the woods as it faces another deadline on Friday to make good on a missed coupon payment from September and a deadline to make three more payments on November 11. The company has US$37 billion in total borrowings that are set to mature by the end of June 2022.

The concerns over Evergrande have been amplified as several smaller developers, including Fantasia Holdings Group, Modern Land (China) and Sinic Holdings Group, have defaulted on their debt in recent weeks.

China’s property developers, China Evergrande Group, averted a default last week, US$37 billion in total borrowings, Fantasia Holdings Group, Modern Land (China), Sinic Holdings Group, concerns over its off-balance debts, issued by Evergrande

SCMP Graphics

The recent defaults have dampened sentiment in the capital markets, according to Simon Lee, primary analyst with rating company Pengyuan International.

“Property developers are expected to face more refinancing challenges in a tight credit environment,” Lee said. “We expect those property developers with lower land bank quality, weaker sales execution capability and higher leverage to face a substantial increase in credit spread as the credit risk and default risk have been escalated.”

However, it is unlikely Beijing will roll out further credit tightening “as the government is striking a balance between financial stability and deleveraging,” he added.

Several heavily indebted developers will see their debt mature in the coming months.

China’s property developers, China Evergrande Group, averted a default last week, US$37 billion in total borrowings, Fantasia Holdings Group, Modern Land (China), Sinic Holdings Group, concerns over its off-balance debts, issued by Evergrande

A view of Evergrande's The Vertex project in Cheung Sha Wan. Photo: K.Y. Cheng

Henan-based Central China Real Estate, which wrote to the provincial government in early August asking for help, has a bond set to mature on November 8, with US$386 million in remaining principal.

Guangzhou-based Agile Group Holdings, whose 11 bonds have seen their prices slump amid investors concerns over its off-balance debts, has a US$200 million bond set to mature on November 18.

On December 3, Ronshine China, the Shanghai developer famous for paying eye-watering prices for land to develop, has a US$150 million bond due. The company has total liabilities of 182.6 billion yuan (US$28.6 billion) and was downgraded by Fitch Ratings last month on weak profitability stemming from high land costs for projects it acquired in the past few years.

On Wednesday, S&P downgraded another debt-laden Chinese developer, Kaisa Group Holdings, to “CCC+”, or three levels below investment grade, saying the its capital structure is “unsustainable given the company‘s sizeable near-term debt maturities, weakening liquidity, and inadequate free cash flow through 2022”.

China’s property developers, China Evergrande Group, averted a default last week, US$37 billion in total borrowings, Fantasia Holdings Group, Modern Land (China), Sinic Holdings Group, concerns over its off-balance debts, issued by Evergrande

The exterior of Kaisa Group’s Concerto development in Sham Shui Po. Photo: Xiaomei Chen

Kaisa’s offshore bonds have seen wild swings in recent weeks amid speculation about the firm’s ability to service its debt. Last week, Chinese Estates Holdings, once Evergrande’s second-biggest shareholder, sold high-yield bonds issued by Kaisa at a loss.

Shenzhen-based Kaisa, the first Chinese developer ever to default on its offshore debt six years ago, has a US$400 million bond set to mature in December.

The National Development and Reform Commission (NDRC) summoned several of China’s biggest offshore bond issuers for a meeting on Tuesday, promising to ease access to foreign exchange cash to help them meet their obligations.

In its note on Wednesday, S&P said that residential property sales in China could fall by 10 per cent next year amid weaker sentiment, and another 5 to 10 per cent in 2023, setting the stage for a difficult operating environment for the mainland’s developers.

China’s property developers, China Evergrande Group, averted a default last week, US$37 billion in total borrowings, Fantasia Holdings Group, Modern Land (China), Sinic Holdings Group, concerns over its off-balance debts, issued by Evergrande

An overdue IOU posted by an Evergrande supplier on the social-media platform Weibo. Photo: Weibo

Another sign of strain is commercial bills, effectively “I owe yous” (IOUs) issued by Evergrande and other developers.

The total amount of outstanding commercial bills by rated developers increased by more than 30 per cent to about 125 billion yuan in 2020 as developers have turned to them amid the tight financing and restrictive regulatory environment, S&P said. The risk to developers is manageable, but suppliers and service providers could stop taking the bills if things worsen, the ratings company said.

“In a more extreme scenario, non-payment risk of developers could cause construction suspension, putting a hard stop to developers’ cash flows. Project delivery and revenue booking would deteriorate rapidly, hitting the credit metrics of developers,” S&P’s Chow and Liang said. “The affected general contractors and suppliers may then stop paying their own suppliers, or stop work for other property developers, causing spillover effects.”

Internet Explorer Channel Network
Asia's Tech News Daily
News Related


Buy INOX Leisure; target of Rs 547: Edelweiss Securities

Edelweiss Securities’ report on INOX Leisure We recently met Mr. Siddharth Jain, Director (and promoter), and Mr. Alok Tandon, CEO, of INOX Leisure. If there is no serious wave 3 ... Read more »

McColl's eyes recovery from shortages crisis but issue remains 'major constraint'

The convenience store chain, which suffered a fall in annual revenues partly caused by the disruption, said sales were continuing to be affected into the new financial year. Read more »

Electricity production from coal doubled last quarter

Electricity production from coal doubled in the past quarter compared to a year earlier. The Central Bureau of Statistics (CBS) reports that it was 96 percent higher. On the other ... Read more »

KFC announces the return of 11 Herbs and Spices Firelog for the holidays

Photo by: KFC Press Release KFC just revealed it had brought back its popular 11 Herb and Spices Firelog that has become a favorite of most customers. The fried chicken-scented ... Read more »

Moneycontrol Pro Panorama | Take guard, expect more swings in the market

Representative image Dear Reader, The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little ... Read more »

Nirmala Sitharaman, Nykaa's Falguni Nayar make it to Forbes list of 100 most powerful women

Finance Minister Nirmala Sitharaman and Nykaa CEO FAlguni Nayar (Image credit: Forbes) Forbes on Tuesday announced its 18th annual ranking of The World’s 100 Most Powerful Women, the definitive audit ... Read more »

Aedes concerned about commercial construction of social rental homes

Photo: ANP Aedes, the umbrella organization of housing associations, is concerned about commercial parties that build cheap social rental housing, where this was previously done by housing associations. Aedes thinks ... Read more »

Volkswagen secures raw materials as part of $34 billion battery push

Volkswagen on Wednesday announced key partnerships to secure raw materials Europe’s largest carmaker needs to realise its ambitious electric vehicle strategy, eager to close a gap with rival Tesla . ... Read more »

Need tighter regulations to deal with cybercrimes: IT minister Ashwini Vaishnaw in Lok Sabha

IT Minister Ashwini Vaishnaw in Lok Sabha There is a need for tighter regulations to deal with cybercrimes, Union Minister for Electronics and Information Technology Ashwini Vaishnaw said on Wednesday. ... Read more »

NFT: DraftKings Marketplace releasing gamified NFL NFT collection next season

Photo by: Pexels/Pixabay DraftKings Marketplace, one of the best spots on the blockchain to find and purchase the latest NFT drops from celebrities, has expanded its partnership with the National ... Read more »

Kellogg's workers turn down labor deal, prolonging the strike

Photo by: Haithem Ferdi/Unsplash Workers of Kellogg's have been on strike for weeks now and it seems that the end of its conflict with the company is still very far. ... Read more »

Nestle slashes stake in L'Oreal by selling $10 billion worth of shares

Photo by: Prasann Tank/Unsplash Nestle revealed it will be trimming its stake in L'Oreal and will be shelling out around 20% shares worth $10 billion or €8.9 billion. The multinational ... Read more »

ABB India to deploy next-gen digital tech for power supply in Indore

[Representative image: Shutterstock] ABB India on Wednesday said it has partnered with Indore Smart City Development Ltd (ISCDL) to deploy next-generation digital technology that enables continuous supply of electricity to ... Read more »

Joint business group sees GDP growth next year 3%-4.5%

Discounts are offered on leather products at a shopping centre in Bangkok. (Photo: Somchai Poomlard) The country’s leading joint-business group on Wednesday said it expects gross domestic product growth in ... Read more »

Noodles, spicy Sichuan and Shanghai buns: where a fan of Chinese food likes to eat in Hong Kong

Hospitality veteran Jared Lawler, a native of Melbourne, Australia, founded The Porter, a bespoke service-oriented coffee shop. It has recently opened at a third location in Hong Kong, One Island ... Read more »

Study: Chinese chip technology poses security risk to EU

Photo: ANP China’s rapid progress in semiconductor technology poses a security risk to Europe. This is evident from a new research report that will be presented in Berlin on Wednesday. ... Read more »

OUE Lippo Healthcare divests 12 nursing homes in Japan to First Reit for $163.5m

The Comprehensive Cancer Centre in Jakarta. The nursing homes in Japan will have a total capacity of 1,451 units. SINGAPORE (THE BUSINESS TIMES) – Singapore-listed OUE Lippo Healthcare (OUELH) has ... Read more »

Elon Musk responds to Indian American's tweet on entertaining kids in Tesla Model 3 car

Elon Musk. (File photo) Tesla is a huge part of Raj Balwani’s life. The Indian-American YouTuber — whose parents were born in Mumbai — not only owns Tesla Model 3 ... Read more »

Kruidvat opens new distribution center in Oosterhout

Photo: ANP Drugstore chain Kruidvat will open a new distribution center in Oosterhout in Brabant next spring. About four hundred stores in the south of the Netherlands and in Belgium ... Read more »

Cyber security, digital frauds major challenges in rolling out digital currency, says RBI deputy governor

Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar has identified cyber security and digital frauds as the two major challenges in rolling out a central bank digital currency (CBDC). ... Read more »

Tui warns on Omicron hit - but sees holidaymakers splash out on pricier breaks next year

Capacity for the current season could be at the lower end of expectations after recent trends, the travel operator said as it reported another year of steep losses. Read more »

Unions complain to Inspectorate SZW about office duty Nouryon

Photo: ANP Trade unions FNV, CNV and VMHP have filed a complaint with the Inspectorate SZW against Noryon. Office staff of the chemical company should be required to come to ... Read more »

Ngee Ann Kongsi's $2.94m donation to IPS over three years

Minister for Home Affairs and Law K. Shanmugam (centre) was the guest of honour at the cheque presentation ceremony. SINGAPORE – Low-income families who need some cash to pay the ... Read more »

India successfully test-fires air version of BrahMos supersonic cruise missile off Odisha coast

BRAHMOS surface-to-surface supersonic cruise missile featuring indigenous Booster and Airframe Section along with many other ‘Made in India’ sub-systems was successfully flight tested for designated range at 1030 hours today ... Read more »

These are the 50 'best bars' in the world for 2021

London's Connaught Bar is the best bar in the world — again. That's according to “The World's 50 Best Bars,” an annual ranking by William Reed Business Media, a U.K.-based ... Read more »

Want to benchmark Indian telecom regulations against best in world, open to new reforms: Ashwini Vaishnaw

Ashwini Vaishnaw, who visited the Jammu railway station and a community service centre (CSC), took stock of the facilities being provided to the public. (File image: ANI) Telecom Minister Ashwini ... Read more »

How to wear velvet like Taylor Swift, Harry Styles and Gwyneth Paltrow and why the retro look is a good investment

As a true fashion moment, Gwyneth Paltrow reprising a version of that red velvet Tom Ford-era Gucci suit at the recent Gucci Love Parade show in Los Angeles had the ... Read more »

Dhan introduces direct trading through charts, ties up with TradingView

Representational image. Investment and trading platform Dhan has introduced a new product for users that will allow them to trade directly through charts in equity, options and futures for indices ... Read more »

RBI to work on PMC Bank resolution 'very quickly', says Governor Shaktikanta Das

The RBI crackdown on co-operative banks continues in 2021 as well. [Representational Image] The Reserve Bank of India will act “very quickly” on the Punjab and Maharashtra Cooperative Bank resolution once ... Read more »

Doubts about production of electric cars Evergrande subsidiary

Photo: ANP Two car models developed by the electric car division of ailing Evergrande are not on an approval list from China’s Ministry of Industry and Information Technology. The absence ... Read more »

Kellogg's fires 1,400 striking employees after bitter battle over benefits

The Kellogg Company, the largest producer of breakfast cereals in the United States, is to “permanently replace” 1,400 workers who have been on strike since early October. The decision comes ... Read more »

Asian shares mostly higher as virus fears ease

The Associated PressA man walks by an electronic stock board of a securities firm in Tokyo, Wednesday, Dec. 8, 2021. Stocks advanced Wednesday in Asia after another broad rally on ... Read more »

Punjab Assembly polls: How well has Captain Amarinder Singh read the pitch?

Amarinder Singh (File image) Punjab is gearing up to elect a new government early next year and every political party is preparing to gather its forces in preparation for the ... Read more »

Rabobank lowers economic growth forecast in 2022

Photo: ANP Rabobank is lowering its forecast for the growth of the Dutch economy in 2022 due to the revival of the coronavirus and stricter measures to combat the pandemic. ... Read more »

More than 6,00,000 Indians gave up their citizenship in last five years 

(Reuters) More than 600,000 Indians gave up their citizenship during the last five years, Union Minister of State for Home Nityanand Rai informed the Lok Sabha. While 133,000 Indians gave ... Read more »

Brokerages raise Bharti Airtel's ARPU estimates, expect 22% upside

Bharti Airtel Bharti Airtel share was trading higher in the afternoon on December 8 after Goldman Sachs maintained a “buy” rating on the stock with the target of Rs 870 a ... Read more »

HNA Group divests aviation unit to strategic investor in business break-up as bankruptcy reorganisation progresses

HNA Group, China’s once high-flying conglomerate, has officially handed its core aviation business to a strategic investor, after breaking up its core businesses under a bankruptcy reorganisation to untangle US$111 ... Read more »

Omikron continues to determine stock market sentiment, ASR loses place in AEX

Photo: ANP European stocks appear to start the new trading day higher on Wednesday. The Omikron variant of the coronavirus continues to determine sentiment on the stock exchange floors. In ... Read more »

Avoid to Shriram Properties: Hem Securities

Hem Securities IPO report on Shriram Properties Shriram Properties is one of the leading residential real estate development companies in South India, primarily Company is among the top five residential ... Read more »

World looking towards India for affordable, sustainable tech-enabled solutions: PM Modi

Prime Minister Narendra Modi on Monday said the benchmark for assessment should be how Parliament functioned and not how forcefully it was disrupted, as he asserted that the dignity of ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic