Original title: Another top 100 real estate companies defaulted on multiple Chinese real estate US dollar bonds fell by more than 20%
China Times reporter Wang Yongfei and Ran Xuedong report from Beijing
What worries the market still happened. On October 11, Modern Land (01107.HK) announced on the Hong Kong Stock Exchange that the company seeks to extend the maturity date of the 12.85% senior notes due in 2021 by three months. This is equivalent to its failure to pay on time and the official declaration of breach of contract!
Real estate bonds continued to fall for 6 days, and China Land’s US dollar bond high-yield MarkitIboxx index also fell sharply. In particular, since Fantasia Holdings (01777.HK) failed to pay the remaining outstanding principal of the 2021 notes on the maturity date on October 4, many Chinese real estate US dollar bonds have fallen by more than 20%. Major real estate companies once Both stocks and debts fell.
It is worth noting that in the past week, bonds maturing in 2021 of China-funded real estate dollar bonds have suffered the most, followed by bonds maturing in 2022, and bonds maturing in 2023, 2024, and 2025 have experienced relatively flat declines. Among them, Fantasia Holdings’ FTHDGR2021 (Fantasia 21-year maturity bonds) has fallen by more than 40%. Many Fantasia Holdings’ bonds have contracted the top 5 year-to-date declines; Modern Land MOLAND2021 (Modern Land 21-year maturity bonds) The decline is even more than 50%. Will this be the darkness before the dawn of real estate debt?
Crisis week
The bonds issued by large real estate companies have experienced substantial defaults, and the US dollar bonds of Chinese real estate that investors prefer are in a moment of crisis. Last week, the real estate dollar debt plummeted and ushered in a “crisis week.” So far, more than 100 real estate companies have defaulted on debt, including Evergrande, Sunshine 100 China,Blu-ray development, Xiexin Yuanchuang and many other real estate companies.
After the Evergrande bond default crisis, the concept of “big but not falling” has been greatly challenged. The bonds due in 2021 of Country Garden, Kaisa (01638.HK) and Sunac, which have a relatively high stock of USD bonds in Chinese real estate, are also highly vigilant by market investors. In the real estate debt, Modern Land, Aoyuan,Sunshine City000671.SZ), Yuzhou (01628.HK), and many other US dollar bonds issued by China Jianye also failed to escape the fate of falling, and many real estate US dollar bonds were facing greater selling pressure.
On October 4, Fantasia Holdings declared that its US$206 million bills due on October 4, 2021 had not been repaid as scheduled, and Fantasia’s US dollar bonds had substantially defaulted. After the largest one-day drop since the issuance of Chinese real estate dollar bonds on July 26, a new round of declines encountered on October 4 forced some real estate companies to adopt large-scale repurchases to respond to the market plunge and restore market confidence.
In order to maintain market credit, many real estate companies have begun to buy back US dollar debt. Since October 5, Yuzhou (01628.HK), DXN (02019.HK), Rongxin (03301.HK), Jinhui Holdings (09993. HK), Hongyang (01996.HK) and other companies disclosed the US dollar bond repurchase plan, but they still cannot escape the fate of falling.
Among them, Yuzhou repurchased the most. On the evening of October 6, the official announcement of Yuzhou Group stated that the company had repurchased in the open market a total of 10 million US dollars of secured senior notes due in 2022. According to statistics, as of now, Yuzhou Group has repurchased a total of US$45.5 million in overseas senior notes in 2021, and all domestic corporate bonds and overseas US dollar senior notes due in 2021 have been fully paid.
The panic caused by the current round of real estate slump has also brought the crisis of trust in real estate debt to a high point. According to the China Real Estate Dollar Bond High Yield Markit Iboxx Index, real estate junk bonds (high-risk, high-yield bonds) have fallen by more than 30%, and the year-to-date decline has been as high as 30.59%. As a reference data, the data of the IBOXX China Real Estate High Yield Dollar Index of the European debt crisis in 2009 was 36%, and the decline of the US debt crisis in 2008 was 58.89%.
The reporter’s statistics found that since the beginning of this year, some real estate companies that have been under liquidity pressure and high default risk have been downgraded frequently, and prices have also fallen sharply.Capital, Country Garden, Sino-Ocean, World Trade Center, Xincheng, Wanda, Yaleju, Logan Xuhui, Zhongjun, KWG, and Jinhui have all fallen to the 80- and 90-yuan range; Sunac, Aoyuan, Hongyang, R&F Etc. have fallen to 60-70 yuan; Greenland, Rongsheng, Sunshine City, Jianye, Rongxin and South China City have fallen to 40-50 yuan; Evergrande, Dangdai, Sony, Fantasia, Tahoe, Blu-ray andChina FortuneWait for multiple prices to fall by 2/3, down to 20-30 yuan.
Industrial BankXu Hanfei, chief bond strategist of the financial market business and research director of Xingyin’s wealth management research, told the reporter of China Times: “Due to three major factors including the rising debt default rate of leading real estate developers, the delay of bond repayment by some real estate developers, and the cooling of the overall real estate market during the National Day holiday. As a result, Chinese real estate dollar bonds, which are dominated by private Chinese real estate companies, have seen a significant decline.”
A number of latest real estate maturity bonds have been downgraded
In the context of the collapse of real estate’s dollar debt last week, the solvency of multiple real estate debts that are about to mature has also been questioned. Take the latest maturity dollar bond MOLAND2021 of Modern Land as an example. With less than one month left to maturity, the price has fallen by half and is currently maintained at 70 yuan. It is understood that its return to maturity for investors as promised is as high as 2957%. However, the payment of its US$250 million notes due on October 25 has been delayed, which really worries the market.
On October 9th, the contemporary real estate bond continued its 8-day decline, and the prices of its 4 bonds fell in half. MOLAND 11.8 02/26/22 fell 56.7%, MOLAND 11 11/13/22 fell 51%, and MOLAND 11.95 03/04/ 24 fell 38%, MOLAND 9.8 04/11/23 fell 26%, the decline is far ahead of the impending real estate debt.
The Announcement of Modern Real Estate shows that the purpose of seeking consent for the extension is to improve liquidity and cash flow management, and to avoid any potential payment defaults. These notes with a total principal amount of US$250 million and approximately RMB 1.62 billion will mature on October 25. Modern Land seeks to extend the maturity date to January 25, 2022, first redeem the principal amount of US$87.5 million to reduce the principal amount of outstanding notes, and other matters. The consent solicitation will expire at 5 p.m. Central European time on October 20.
In the next week, more than 20 real estate corporate bonds are about to mature or pay interest. “For real estate bonds that are due in the near future, it is expected that the probability of delayed payment by some companies will increase, especially for private real estate developers with high debt ratios, weak cash flow, and poor external financing capabilities.” Xu Hanfei reminded.
Among the real estate dollar bonds nearing maturity, the SINHLD 9 1/2 10/18/21 dollar bonds of Sony Holdings, which will expire on October 18, have increased uncertainty. In addition, the ratings of Helenborg and Xinyuan Real Estate have also been downgraded.
On September 28, although Moody’s maintained the “B2” corporate family rating and the “B3” senior unsecured rating of Helensburgh, its rating outlook was adjusted from “stable” to “negative”. Moody’s believes that Helenberg China’s liquidity buffer and credit indicators will be weakened, and its cash holdings and cash flow generated from operating activities will be sufficient to cover the debt due in the next 12-18 months and the promised land payment.
On July 30, Standard & Poor’s adjusted Xinyuan Real Estate’s rating outlook from “stable” to “negative”, and at the same time confirmed its “B-” long-term issuer credit rating and its outstanding senior unsecured notes “CCC” Long-term issue rating. Standard & Poor’s believes that Xinyuan Real Estate may become weaker in the credit market after announcing the postponement of financial statements. However, its debt maturity status is not concentrated, so Standard & Poor’s believes that it is expected to deal with maturing debt one by one.
This round of Chinese-funded US dollar real estate bonds is facing a great test, and it may be difficult to get through the crisis by borrowing new and repaying the old issuance plan bonds. Using large-scale repurchases or discount purchases to save market confidence and maintain corporate credit may become the key to overcoming the crisis.
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