Panic-stricken investors drive down Chinese developer Agile's bonds amid rumours about its ability to repay loans

Asia's Tech News Daily

Agile Group Holdings, made a US$83.5 million interest payment, Sinic Holdings Group, Fantasia Holdings Group, Modern Land (China)

Chinese developer Agile Group Holdings on Friday tried to reassure investors that it has enough money on hand to service debt, including off-balance sheet loans, after rumours drove down its bond prices.

The prices of 11 US dollar dominated bonds of the Guangzhou-based Chinese developer plunged as panic-stricken investors sold the notes amid speculation that the company could struggle to make coupon payments due soon.

“The company only has one off-balance sheet loan due in November worth US$250 million and there is no more,” an Agile spokesman said in a briefing to investors. “We have enough money to pay our debts, both onshore and offshore.”

Agile had 38 billion yuan (US$5.9 billion) of cash as of the end of September, including 10 billion yuan of restricted cash, the spokesman said.

Its most active US dollar-denominated bond due October 2025 declined to US$85 today from US$101 three months ago, while one of its perpetual bonds dropped to US$75.50.

The debt woes of China Evergrande Group, weighed down by US$305 billion of liabilities, have plagued bond and equity markets for the past few months, making investors extremely jittery. On Thursday, China’s largest developer by sales made a US$83.5 million interest payment on its offshore bond, just before a 30-day grace period would have declared it in default.

Several other Chinese developers, including Hong Kong-listed Sinic Holdings Group and Shanghai-listed Fantasia Holdings Group, have defaulted on their debt this month, sparking a series of downgrades in the sector by major credit rating agencies.

On Wednesday, Modern Land (China) cancelled its plan to repay a portion of a high-yield US$250 million bond and extend it just days before it was set to mature.

Agile Group has one US$200 million bond maturing by the end of this year and a US$1.1 billion note maturing in 2022.

Investors, however, are worried about debt that is not on the financial reports of Chinese developers, according to analysts.

Evergrande and other mainland property developers are likely to have shifted some of their interest-bearing borrowings to debt held off-balance sheet, as well as to commercial paper, wealth management products and perpetual capital securities, to appear to comply with Beijing’s deleveraging push, JPMorgan Chase analysts Karl Chan and Elaine Wu wrote in a research note earlier this month.

“It is possible that the real gearing could be even higher, as data on some off-balance sheet debt is not publicly available,” they said.

Agile, along with Evergrande, Guangzhou R&F Properties, China Sunac Holdings and Country Garden, are likely to have higher net gearing ratios once you adjust for off-balance-sheet debt, according to JPMorgan.

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