[The Epoch Times, January 21, 2022](Comprehensive report by The Epoch Times reporter Li Jing) China Aoyuan recently released an announcement that shook the real estate market. The real estate giant not only did not initiate any tender offer for the expiring US dollar bills in advance, but also announced a default before the maturity date, and said that a default event would occur (or had occurred) under all its overseas financial liabilities.
On the evening of January 19th, China Aoyuan announced that the company will not be due to expire on January 20, 2022 with a total principal of 188 million US dollars and on January 23 with a total principal of 500 million US dollars. The remaining principal and the final interest are paid on the USD notes.
At the same time, the announcement also stated that after the expiration of the 30-day grace period, it will not pay the total principal due in June 2023 with a total principal of 200 million U.S. dollars and in June 2024 with a total principal of 200 million U.S. dollars. The latest installment of interest under the note.
China Aoyuan said that after careful consideration of liquidity conditions, and in order to retain limited cash resources and be fair to all creditors pending overall debt restructuring, China Aoyuan intends to adopt the same principles for other overseas financial debts.
China Aoyuan also reminded that events of default will occur (or have occurred) under all other overseas financial liabilities of the Group.
After the official announcement of default, China Aoyuan is about to enter the stage of debt restructuring.
China Aoyuan also stated in the announcement that as of the date of the announcement, its external professional consultants have made significant progress in evaluation and due diligence, and it is working closely with these external professional consultants to ensure that after completing the necessary evaluation and due diligence, As soon as practicable, propose a restructuring proposal to creditors and other stakeholders (if applicable) for consideration as soon as possible.
“21st Century Business Herald” pointed out that the announcement of China Aoyuan somewhat surprised the market and investors. Not only did it not initiate any tender offer for the dollar bills due this week, but also announced a default before the expiration date, even if some real estate companies encountered liquidity problems recently, such an attitude. And the practice is obviously different from other real estate companies.
Affected by tight liquidity, China Aoyuan’s performance has continued to slump. According to the announcement, as of December 31, 2021, China Aoyuan recorded unaudited property contract sales of approximately RMB121.03 billion (RMB, the same below), representing a year-on-year decrease of approximately 9.0%.
“The continued downturn in the market has dampened consumer confidence, making it difficult for the Group to realise inventory and sell assets on reasonable terms,” China Aoyuan said.
The CCP has set up “three red lines”, and China Aoyuan faces debt repayment pressure
For China Aoyuan, the starting point of the debt crisis appears to be October 2021.
An insider of China Aoyuan previously disclosed to China Business News that since Fantasia’s default in early October, creditors have successively proposed to China Aoyuan to repay the loan in advance, and the pressure was already felt inside. The successive downgrades by rating agencies have triggered the relevant default clauses of some overseas dollar bonds, and creditors also demanded that Aoyuan repay in advance. The sudden increase in debt repayment demands made Aoyuan embattled for a while.
From mid-October 2021, the three internationally renowned credit rating agencies Fitch, S&P and Moody’s have repeatedly downgraded China Aoyuan, Kaisa Group, China Evergrande, Fantasia , Greenland Holdings, Sunshine City, R&F Properties and other Chinese real estate companies, citing financial crisis.
The downgrade of the rating has almost closed the door to the overseas financing market for real estate companies. In addition, domestic financing is not easy. The “Three Red Lines” officially set by the CCP have become a “stumbling block” on the road to financing for real estate companies.
The tight liquidity of funds has undoubtedly exacerbated the high debt repayment pressure of China Aoyuan. As of the end of June 2021, China Aoyuan had total assets of 316.2 billion yuan and total liabilities of 262.9 billion yuan, of which about 51.7 billion yuan of debt will be due within one year, and cash on hand is 60.645 billion yuan.
At the same time that China Aoyuan announced the debt situation, another Chinese real estate giant “China Fortune Land Development” issued an announcement saying: “The company has a total of 219.2 billion yuan of financial debts, and the accumulated debts that have not been repaid as scheduled so far total 93.556 billion yuan. “
In addition, Xiangsheng Group, a Chinese real estate company, is currently facing enormous pressure to repay its short-term debt. As of the end of June 2021, the total assets of Xiangsheng Holdings reached 172.656 billion yuan, of which the total liabilities reached 153.093 billion yuan, and the book asset-liability ratio reached 88.67%.
A US dollar bond of Xiangsheng Holdings with an amount of US$291.55 million is about to mature on January 23, 2022, and the maturity date is currently less than a month away. Xiangsheng Holdings has two other bonds totaling US$400 million due in June 2022 and August 2023.
Also in debt distress is Kaisa, which said in an announcement on December 3, 2021 that it failed to seek a rollover of a note with a total principal of $400 million. Kaisa’s dollar-denominated debt is second only to China Evergrande Group, which has attracted attention from the outside world.
Responsible editor: Sun Yun#