Hong Kong-listed Sinic defaulted on $ 246 million of bonds due to mature on Monday, based on Bloomberg data, in line with a warning last week and adding to a default of 206 million dollars from luxury developer Fantasia Holdings this month.
Borrowing costs in the Asian bond market for riskier corporate issuers have skyrocketed in the weeks after Evergrande, the world’s most indebted real estate developer, missed bond payments in late September and stoked debt global fears about a slowdown in the Chinese real estate sector.
Official figures released on Tuesday, accompanying disappointing gross domestic product data a day earlier, showed real estate production was up 8.2% in the first nine months of this year but down 1.6% in the third quarter year-on-year, its first quarterly contraction since the start of the pandemic.
Evergrande’s initial default to pay interest on its dollar-denominated debt on September 23, which it has yet to make any public announcement on, has triggered a 30-day grace period that ends on Saturday and could lead to default formal. Bond advisers complained about a lack of “meaningful engagement” on the part of the company.
Evergrande also had an interest payment due Tuesday on an onshore bond and previously said in a statement it would make the payment. Reuters said on Tuesday the payment had been made.
China’s central bank weighed in on Evergrande’s situation for the first time on Friday, with a People’s Bank of China official blaming the company for its problems and saying the fallout to the financial system was “controllable.”
Evergrande, which was engulfed by a rapidly unfolding liquidity crunch over the summer, now epitomizes broader challenges in China’s real estate industry. Real estate contributes more than a quarter of GDP, but has struggled after companies came under government pressure to reduce debt.
In addition to Sinic’s default, a series of recent downgrades by international rating agencies have highlighted the difficulties the sector faces at a time when data also shows that new home sales are slowing sharply year on year. other and that high borrowing costs make refinancing expensive.
Last week, Fitch uploaded developer Modern Land (China) to C. The developer had decided earlier this month to extend the maturity of bonds maturing next week. The US rating agency said it “considers the solicitation of consent necessary for Modern Land to avoid default given the tight cash flow.”
On Friday, S&P downgraded the rating of residential developer China Aoyuan, as the rating agency expected “its rate of deleveraging to slow in a difficult operating environment.”
Yields from some developers whose payments are due this week, such as Kaisa Group and Sunac, have fallen amid reports that companies are making coupon payments.
Reportage de Thomas Hale, Wang Xueqiao et William Langley