Shimao’s debt problem raises concerns about the cash crisis in China’s real estate

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The Shanghai Stock Exchange has stopped trading some bonds of Chinese real estate developer Shimao. The day after the company failed to pay its loans, there was growing concern that the cash crisis could spread throughout the confused real estate industry in the country.

Trading 3 RMB bonds from home developers, unlike many of the struggling peers, recently held an investment grade credit rating, but sharply followed Thursday’s report of a payment omission. It was temporarily suspended due to a sharp decline.

Shimao’s problem is mainly Higher risk credit rating Evergrande, Kaisa Group, etc. have more highly rated developers Slow home sales And the loss of investor trust.

The country’s economically important real estate sector has slowed significantly in recent months after construction delays and fears of default to Evergrande, which had heavy debt, have depleted funds. Fueling a wider cash crunch.. Evergrande and some of its peers are already in default in the international market.

Chinese authorities responded by setting government figures on the risk committee Manage Evergrande restructuring Announced Stimulation measures To support the economy. However, Shimao’s problems suggested that these developments did not solve the liquidity problem that plagued the sector.

The Shimao unit said in a statement on Friday that despite facing liquidity pressures, it has not defaulted on public debt and is taking steps to increase the sale of real estate and assets. However, the bond quickly focused on the offshore bond market, which borrowed $ 7 billion, compared to Evergrande’s $ 19 billion.

Shimao bonds, which mature in July, previously traded at over $ 1.70, but have fallen to $ 1.49. In Hong Kong, Shimao’s share price fell 7% on Friday.

An investor in Hong Kong has suggested that other “double B names” pointing to credit ratings just below investment grade will also experience tensions. “People used to think Shimao should be relatively safe,” he said.

One of Shimao’s units missed a payment of RMB 645 million ($ 103 million) in a letter to investors by China Credit Trust, a trust lender on behalf of the group. The transaction was suspended after he stated that he had defaulted on his debt. On Friday, Mr Shimao was discussing payments and said the issue would not affect other debt.

To counter concerns about the asset bubble, Beijing last year imposed rules on real estate developers who limit borrowing. Unlike many of his peers, Shimao says, “3 red linesIt emphasizes the more secure business vulnerability to market volatility.

Major Chinese developers are experiencing sluggish apartment sales, Refinancing options are already constrained.. Based in Shanghai, Shimao’s 2021 sales were RMB270 billion, down 10% year-on-year. Citi analysts estimate December sales were down 68%.

The company received market attention in November with concerns related to mainland trust products and was downgraded by an international rating agency in December, even though it said its operations were “normal.” Fitch said last month that the company faced a “declining investor confidence” that could affect its refinancing capacity.

“Some of China’s strongest real estate developers have resumed issuing domestic debt securities, but Shimao may not be able to use that means unless investor confidence is restored,” the rating agency said. ..

Additional reports by Wang Xueqiao in Shanghai, Andy Lin in Hong Kong and Sun Yu in Beijing

Shimao’s debt problem raises concerns about the cash crisis in China’s real estate

Source link Shimao’s debt problem raises concerns about the cash crisis in China’s real estate

The post Shimao’s debt problem raises concerns about the cash crisis in China’s real estate appeared first on Eminetra.

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