Shimao, a significant actual property developer in Shanghai, defaults

Hong Kong
CNN Business

Another major Chinese developer has defaulted on debt, handling a fresh blow to the ailing real estate sector of the world’s second-largest economy.

Headquarters in Shanghai Shimao group According to a company filed on the Hong Kong stock exchange, the interest and principal payments on the $1 billion bond were due on Sunday. The bond has no principal grace period, according to its offering document.

It is the first miss repayment on a dollar bond of Shimao, was grappling with increased financial stress for many months.

China’s real estate sector has sunk from one crisis to another since 2020, as Beijing began to clamp down on developers borrowing too much to try to rein in China’s high debt. They and restrained housing prices fled.

The problems escalated dramatically last fall when Evergrande – the second largest property developer in China – began scrambling for cash to repay lenders. Attached company is China’s most indebted real estate developer with about $300 billion in liabilities. It is labeled as default person by Fitch Rating in December.

Based on Moody’s estimates Earlier this year, Shimao Group had a large amount of debt maturing in 2022, including $1.7 billion worth of bonds held by international investors, and 8.9 billion yuan worth of bonds. ($1.4 billion) held by Chinese investors and “sizable” foreign bank loans.

An elderly couple walks past a sign in front of the Shimao Tower, developed by Shimao Group Holdings Ltd., in Shanghai, China, on Saturday, January 8, 2022.

Founded by businessman Hui Wing Mau in 2001, Shimao develops large-scale residential and hotel projects across the country. It owns Shanghai Shimao International Plaza, one of the tallest skyscrapers located in central Shanghai.

In March, the company estimated its 2021 net profit was down about 62% from a year earlier, mainly due to the “harsh” environment of the real estate sector. It then delayed the release of 2021 results, citing the closures in Shanghai.

“Due to the significant changes to the macro environment of the real estate sector in China since the second half of 2021 and the impact of Covid-19, the Group experienced a significant decline in contract sales. copper in recent months, is expected to continue in the near term until the property sector in China stabilizes,” Shimao said in the filing Sunday.

The company added that it was trying to reach “friendly solutions” with creditors over the failure to make other overseas principal payments. debt. In the absence of an agreement, creditors can force the company to speed up repayment.

Since Evergrande defaulted, a series of well-known domestic developers have defaulted about their debts, including Fantasia and Kaisa.

The industry’s problems are exacerbated by Beijing’s zero-Covid policy and a slowing economy. China placed many of its major cities – including Shanghai – under lockdown earlier this year to combat growing Covid cases, which have severely impacted business.

Headquartered in Beijing Sunac China, one of the largest developers in the country, last month blame the Covid outbreak for “significant” damage its sales in March and April and exacerbated its liquidity slump. At the same time, the developer also admitted that they defaulted on a dollar bond.

On Friday, a survey by China Index Academy – a real estate research firm – showed that new home prices in 100 cities fell more than 40% in the first half of this year, compared with the same period last year.

Authorities are trying to stop the bleeding. Surname has ramped up efforts to revive home sales by lowering mortgage rates and relaxing homebuying regulations. Some developers have launched Imaginative ways to drive sales – from accepting grain or garlic payments to offering pigs as an incentive to buyers.

Despite signs of a significant drop in sales in June from previous months, the property sector’s road to recovery is likely to be “quite bumpy”, as Beijing remains committed to with its zero-Covid approach, Nomura analysts said in a note on Monday.

Evergrande, meanwhile, is preparing a massive debt restructuring plan led by the government. Producer plan present its proposals before the end of this month.

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