Evergrande crisis: developer Modern Land (China) cancels US$250 million bond repayment plan on liquidity issues

Asia's Tech News Daily

China Evergrande Group, terminated a deal, exchange filing

China’s property market has taken another turn for the worse as developer Modern Land (China) has cancelled its plan to repay a portion of a US$250 million junk bond and extend it just days before it was set to mature, joining China Evergrande Group and other peers in a financial mess.

The Beijing-based builder scrapped a solicitation process related to a 12.85 per cent US$250 million bond due on October 25, citing liquidity issues and saying the exercise “would not be in the best interest of the company” and its stakeholders. It had earlier proposed to pay US$87.5 million of the principal and extend the payment deadline on the balance by three months.

The decision was made despite an earlier pledge by the company’s chairman and its president to lend Modern Land 800 million yuan (US$125.1 million) to ease its cash crunch. It came on the same day Evergrande acrimoniously terminated a deal to sell some of its assets to a rival in an attempt to raise US$2.6 billion of cash and avert a default.

Modern Land is now planning to engage an independent financial adviser to assess its capital structure, liquidity profile, operating and financial condition “with a view to achieving a feasible solution to its current liquidity issues,” it said in an exchange filing late Wednesday.

The decision by Modern Land to scrap its repayment plans is another blow to investors holding Chinese high yield bonds sold by developers as the industry continues to show cracks from months of policy tightening.

Many cash-strapped developers have been shut out of the loan and bond markets since Chinese authorities added its “three red lines” rules last year to control excessive leverage in the sector.

A government report this week showed new home prices shrank last month for the first time in six years, as confidence among homebuyers weakened amid the fallout triggered by the crisis surrounding Evergrande’s US$305 billion liabilities.

Additional reporting by David Yong

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