Property Stocks Drop; Kaisa Has Yet to Pay: Evergrande Update

·8 min read

(Bloomberg) -- Chinese property developers are putting their own shares under pressure as they look to raise cash to pay debt and ride out a historic funding squeeze.

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Shares of Sunac China Holdings Ltd. declined almost 12% after the company raised about $953 million through the sale of new stock and a stake in its property-management unit. China Aoyuan Group Ltd. tumbled more than 11% after it said it would sell Hong Kong properties at a loss. Other developers also retreated.

The moves underscore how Chinese property companies are increasingly prioritizing debt-servicing over protecting their share valuations as they look to ease a liquidity crunch that’s roiled global markets. Bonds rallied Monday even as data showed declines in the country’s home prices quickened.

Sunac’s 5.95% dollar note due 2024 was up 4.1 cents at 79.5 cents, according to Bloomberg-compiled prices as of 6:09 p.m. in Hong Kong. Chinese junk dollar bonds also rebounded, extending their biggest gain in 20 months last week, following signals that authorities will offer support to ease the cash squeeze.

Meanwhile, at least some of Kaisa Group Holdings Ltd.’s creditors have yet to receive bond interest due last week.

Key Developments:

  • China Junk Bonds Add to Biggest Weekly Rally Since March 2020

  • Stressed China Developers Sell Stock, Cut Dividends for Cash

  • China Developer Sunac Raises $953 Million; Chairman Issues Loan

  • China Developer Sunac Is Said to Explore Sale of Tourism Assets

  • More Chinese Property Firms Plan Bond Sales on Interbank Market

  • China Market Spillovers to World Limited, Ex-PBOC Adviser Says

  • China Analysts Warn of Risks in Indebted Developers: News

  • Chinese Developer Yango Awaits Verdict on Debt-Extension Offer

Kaisa Has Yet to Pay Interest Due Last Week (1:50 p.m. NY)

At least some of Chinese developer Kaisa Group Holdings Ltd.’s creditors haven’t received bond interest that was due last week, according to people with knowledge of the matter, starting the clock on a 30-day grace period before a default.

As of 6 a.m. in New York on Nov. 15, investors in Kaisa’s dollar bonds had yet to receive their payments, said the people, who asked not to be named discussing a private matter. The developer had coupon payments totaling $88.4 million due on Nov. 11 and Nov. 12.

UBS Money Managers to Exit After Fund Hurt (5:23 p.m. HK)

Two UBS Group AG portfolio managers are leaving after a $3 billion fund got caught up in China’s high-yield bond meltdown.

Singapore-based Jiayi Yew and China-based Brian Lou will depart the bank in January, a UBS spokesperson said. Both report to Ross Dilkes, the lead manager of the Asian High Yield fund who is also leaving the firm after about 16 years.

S&P Cuts Jiangsu Zhongnan Debt Rating (3:36 p.m. HK)

Jiangsu Zhongnan Construction Group Co. Ltd.’s debt was lowered to B- from B by S&P Global Ratings, which cited a faster-than-expected narrowing of the company’s financing channels.

S&P assigned a negative outlook to the assessment, reflecting the risk that Zhongnan’s “weak liquidity” may continue to deteriorate over the next 12 months, the ratings company said in a statement.

Greenland Bonds Jump After Category Change (3:22 p.m. HK)

Greenland’s dollar bonds rallied following a statement late Friday that the Chinese firm would now be classified as operating in “construction” rather than “real estate.”

The reclassification comes amid lingering investor uncertainty over recent distress in the real estate industry, and a broader rebound in Chinese junk dollar notes after signs of policy easing for the property industry.

Developers See Rising Bond Pledging Risks (2:48 p.m. HK)

Chinese developer Shanghai Shimao Co. is continuing to see stress building in its local bonds, data from the exchange-traded repo show. The pledge ratio for the issuer’s onshore bonds fell the most in the five trading days through Nov. 12, according to data compiled by Bloomberg. Sunac Real Estate Group Co.’s yuan notes were also among those that saw the ratio decline.

China’s exchange-traded repo market offers a way to monitor changes in onshore credit risk. The so-called pledge ratio determines the value a note has when pledged for cash, and declines in the metric may be a signal of weakening investor confidence.

China Home Market Woes Deepen as Sales Fall (12:17 p.m. HK)

The housing slump deepened in October, adding pressure on authorities to stabilize the market. New-home prices in 70 cities slid 0.25% last month from September, when they fell for the first time in six years, statistics bureau data showed Monday.

The figures may add to speculation that regulators will consider easing their clampdown on leverage in the real-estate industry as the property downturn risks derailing China’s economic recovery.

China Spending, Power Supply Picks Up (11:37 a.m. HK)

China’s economy performed better than expected in October as retail sales climbed and energy shortages eased, partly offsetting a slump in property.

Industrial output rose 3.5% in October from a year earlier, while retail sales growth accelerated to 4.9%, beating economists’ forecasts. Growth in fixed-asset investment eased to 6.1% in the first 10 months of the year, compared with a forecast of 6.2%. The surveyed jobless rate was steady at 4.9%.

The better-than-expected numbers will come as a relief after the economy’s momentum weakened in the second half of the year, with both demand and supply coming under pressure. Beijing’s crackdown on the property market has slowed lending to a sector that accounts for as much as 25% of gross domestic product, while energy shortages have caused factories to curb production.

Developers Drop as Price Declines Accelerate (10:11 a.m. HK)

Shares of Chinese property developers fell after official data showed that home prices in the country declined at a faster rate last month. The CSI 300 Real Estate Index slid as much as 3% and recorded the biggest two-day loss in two weeks.

Companies Issue Shares, Cut Dividends (8:51 a.m. HK)

Sunac China issued shares at a more than 10% discount and borrowed $450 million from its billionaire founder. Kaisa scrapped its interim dividend and China Aoyuan sold investments in Hong Kong apartments and parking spaces at a loss.

The hunt for cash by Chinese property developers accelerated over the weekend. While there are nascent signs of a thaw in the onshore credit market for some real estate companies, the dollar bond market remains shut for most lower-rated borrowers.

Yango Extends Exchange Offer Deadline (8 a.m. HK)

Yango Group has extended the expiration deadline for its dollar bond exchange offer and consent solicitations to 4 p.m. London time on Nov. 17, according to a Hong Kong stock exchange filing. The settlement of new notes, delivery of exchange and consent consideration to eligible holders is scheduled on or about Nov. 23 under the new timetable.

China Aoyuan to Sell Hong Kong Property (7:43 a.m. HK)

Aoyuan Property (Hong Kong), a unit of China Aoyuan, agreed to sell three property investment-holding companies and the loan they owe to the unit for cash to private investor Norman Ng Tang Fai, according to filing to Hong Kong stock exchange Sunday.

Assets of the holding companies include flats and car-parking spaces at Yin Yee Mansion on Robinson Road, Hong Kong Island. Aoyuan expects to recognize estimated loss of about HK$176.6 million ($22.7 million) from the sale. The company will use the proceeds for repayment of a HK$600 million loan facility and general working capital.

Kaisa Group Won’t Pay Interim Dividend (7:35 a.m. HK)

The board of Kaisa Group Holdings Ltd. has resolved that the interim dividend will not be paid, it said in a filing late on Friday. Trading will remain halted until further notice.

Cash-strapped Kaisa is trying to sell property assets with an estimated value of $12.8 billion. Its slow progress on disposals has increased the likelihood it defaults on dollar-bond interest payments at some point, Fitch Ratings said in its latest downgrade last week, citing risks including undisclosed debt from wealth management products and declining sales.

S&P Global Ratings said Thursday in its ratings cut that “a default scenario is inevitable within six months.”

Sunac Raises $953 Million in Share Sale (7:22 a.m. HK)

Sunac raised about $953 million through the sale of new shares as well as a stake in its property-management unit. It sold 335 million shares at a price of HK$15.18 each, raising about $653 million, according to a statement Sunday.

A further $300 million came from a sale of 158 million shares in its property-management arm Sunac Services Holdings Ltd., via a subsidiary. Sunac Services shares were sold at HK$14.75, a discount of 11% to Friday’s closing price.

China CBIRC to Maintain Property Prices (7:15 a.m. HK)

China will continue to curb the “financialization of real estate” and prevent the sector from turning into a bubble, the banking and insurance regulator says in a statement late Friday. It will maintain stable prices of land and housing, improve the long-term mechanism for real-estate regulation, and continue to step up efforts to handle non-performing assets and regulate shadow banking, the statement said.

PBOC Seeks Steady, Sound Property Market (7:10 a.m. HK)

The Chinese central bank will resolutely curb monopoly and the disorderly expansion of capital in the financial services sector, adding it will maintain steady and sound development of the property market, it said in a statement late Friday.

A look at Evergrande’s maturity schedule:

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