Chinese default developer marks latest test in pressured sector
A Chinese real estate developer backed by the country’s largest insurance group defaulted on a $ 530 million bond in the latest test for the country’s indebted real estate sector and the international investors backing it.
China Fortune Land Development’s failure to repay the bond, whose investors include BlackRock and HSBC, comes amid increasing pressure from Beijing on China’s biggest developers to reduce their debts. It follows a wave of corporate defaults late last year that sent shock waves through the country’s $ 15 billion onshore bond market.
In a statement to the Singapore Stock Exchange on Friday, the developer of the industrial park said the repayment, which was due on Sunday, would be delayed. He said he “intended to honor his debt obligations, but needed time to sort out his short-term liquidity issues.”
China Fortune Land is 25% owned by Ping An, China’s largest insurance company, and has $ 4.6 billion in dollar-denominated debt, according to data compiled by Bloomberg. In early February, he said he missed payments of more than Rmb 5.3 billion ($ 820 million) on onshore loans.
China Fortune Land’s $ 530 million bond, which is now listed in default on Bloomberg, was trading at deeply distressed levels of 52 cents on the dollar last week in the high yield dollar denominated bond market in Asia. , where Chinese real estate developers are among the biggest borrowers. .
Fitch Ratings downgraded the company’s debt rating to CC from CCC in early February. He estimated that China Fortune Land owed around 50 billion RMB in late payments from local governments for the development of industrial parks. The property developer ranked 43rd in terms of sales last year, according to Mingtiandi, an online property information service.
The delays had compounded a refinancing difficulty and lack of support from Ping An, Fitch analyst Chloe He said. “The market price has fallen too much. . . they can’t refinance at the current yield, ”she said.
Ping An, who said last month that he had total exposure of $ 8.4 billion to the real estate developer, declined to say whether he continued to support China Fortune.
BlackRock and HSBC, which hold around $ 14 million and $ 10 million of dollar-denominated bonds respectively, declined to comment.
The Chinese government presented a plan in August to reduce leverage along three parameters – the so-called three red lines. Analysts have suggested that the guidelines directly affect the 12 biggest developers.
“I think what is happening is that they [the government] want to test the policy with the 12 [largest] the developers first, then they will decide. . . how can the policy be implemented consistently, with all developers, ”said He.
Bond and stock prices China Evergrande, the world’s most indebted real estate company and China’s largest, passed out in September as it battled fears of a Crunch Crunch after a letter, which she denied, circulated that she had asked for government help.
China Fortune Land Development shares have fallen 34% this year, but gained nearly 20% Thursday and Friday as part of a large industry rally on news of a new land sale program in major cities.
Additional reporting by Wang Xueqiao in Shanghai