China’s Evergrande fights to avoid new standards, Shimao lifts “for sale” signs

A man walks past a wall bearing the logo of the Shimao Group, with residential buildings and the Pudong financial district seen in the background, in Shanghai, China January 1, 2013. Photo taken January 1, 2013. REUTERS / Stringer

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  • Shimao puts assets on the block, rankings cut again
  • Evergrande extends the deadline for deferring bond payments
  • R&F next in focus with $ 750 million debt payment on Thursday

HONG KONG / LONDON, January 10 (Reuters) – China’s real estate sector experienced more drama on Monday after reports Shimao – rated at investment rate until a few months ago – had put all its projects up for sale, and Evergrande tried to avoid a new high – profile standard.

Several unwelcome surprises this month have meant no failure in the Chinese real estate crisis that dried out over a trillion dollars from the sector last year.

Monday’s turnaround saw Shimao Group’s credit rating downgraded again by both S&P and Moody’s after it unexpectedly defaulted on a “trust loan” last week, although shares rose nearly 20% (0813.HK) after reports of selling assets with the state. -supported giant China Vanke. read more

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China Evergrande (3333.HP), the world’s most indebted developer who first triggered the unrest last year, said they had moved out of Shenzhen headquarters to cut costs. read more

The company kept a glimmer of hope alive that its first “onshore” Chinese yuan bond default could still be avoided by extending until Thursday a deadline for bondholders to accept a six-month, 4.5 billion yuan ($ 157 million) deferred payment. read more

Chinese real estate companies have faced unprecedented pressure in the past six months after efforts by Beijing to curb over-lending in the sector.

Reuters reported last week that the government now plans to make it easier for state-subsidized real estate developers to buy up assets of struggling private rivals. read more

But the sector’s cash crunch is also expected to intensify with firms needing to make nearly $ 40 billion in international bond payments over the next six months, according to brokerage firm Nomura, including nearly $ 1.5 billion this week alone.

One of those likely to be highlighted along with Evergrande on Thursday will be Guangzhou R&F Properties (2777.HK). Bonds have fallen to deep turbulent levels ahead of a $ 750 million bond maturing that day. It also has a number of unfinished mega projects in global cities such as London.

“I think the worst may not have come yet,” said Himanshu Porwal, a credit analyst in emerging markets at Seaport Global.

“A lot will depend on what the Chinese government does when it comes to liquidity measures … But four months have already passed, so I do not know what they will wait for.”

China’s high yield crushed by property collapse


The last few days have led to ICE’s high-yield index for high-yield in China (.MERACYC), which is dominated by homebuilders, reaching a record low, while Evergrande and other defaulters Kaisa have seen their bonds thrown out by JP Morgan’s closely followed the rise. market index for corporate debt.

S&P and Moody’s both cut Shimao’s rating deeper into the junk category on Monday and warned of the potential for a further downgrade.

S&P, which had assessed Shimao’s investment grade as late as November, cut it by a full two notches. It said: “The decline is worse than we previously expected. We now consider the company’s liquidity to be weak.”

Moody’s and Fitch also downgraded the Yuzhou Group (1628.HK) due to increased refinancing risk, while Moody’s withdrew its rating to another company, Yango, due to “insufficient information”.

Separately, the small developer Modern Land (1107.HK), which missed payment for its 12.85% banknotes due in October, said in a submission on Monday that it has received messages from certain note holders demanding early repayment of the senior banknotes. their.

The developer said it has discussed a waiver with these creditors and has appointed financial advisors to prepare a plan. It is also in talks about a $ 1.3 billion restructuring plan for its offshore bonds, the company added.

Modern Land shares, which resumed trading after being suspended since October 21, fell 40% in Hong Kong to HK $ 0.23.

“It’s going to be the peak of the payback period, and we’ll see more developers default,” said Kington Lin, CEO of Canfield Securities Limited’s asset management division.

“The market is looking at how many SOEs (state-owned enterprises) will get more M&A loans to help developers in need.”

Chinese real estate companies are facing big bills

(This story is remixed to add the dropped letter in the first paragraph)

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Reporting by Clare Jim and Donny Kwok in Hong Kong, Samuel Shen in Shanghai and Marc Jones in London; ; Edited by Kim Coghill, Shri Navaratnam, Tomasz Janowski and Cynthia Osterman

Our standards: Thomson Reuters Trust Principles.

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