Chinese developer Shimao misses payment on $1 billion bond

Some of China’s biggest property developers are struggling to repay their debts.

BEIJING (Reuters) – Chinese developer Shimao Group said it failed to make payment on a billion-dollar bond that matured on Sunday, one of the biggest defaults of this type so far this year in the country’s struggling real estate sector.

China’s property sector has been struggling since authorities began a crackdown on excessive indebtedness and rampant consumer speculation in 2020, with giants such as Evergrande and Sunac scrambling to make payments and renegotiate with creditors .

The crisis has raised fears that the industry’s struggles could spread to the wider economy, and the latest jolt came on Sunday when Shimao said he had failed to pay principal and interest on a $1 billion offshore note.

In a filing on the Hong Kong Stock Exchange, where it is listed, Shimao said it had experienced a noticeable decline in contract sales due to “significant changes in the macro environment of China’s real estate industry since the second half of 2021 and the impact of Covid-19”.

The company added that it tried to negotiate refinancing and waivers, but was unable to make some payments due to “difficult” market conditions.

He said he had not received notice from creditors for accelerated repayment and the lenders had indicated they would not take enforcement action at this stage.

Shimao develops residential, hotel, office and commercial properties in China, with projects in major cities such as Beijing and Shanghai.

According to Bloomberg News, it was the 14th largest Chinese developer by contracted sales last year.

Chinese property developers are struggling as home buyers have tightened their purse strings due to an uncertain economic outlook.

A company in the eastern city of Nanjing said it would accept truckloads of watermelons as down payment from local farmers, according to Chinese media.

“The contagion has spread from Evergrande to Sunac and now to Shimao,” Bloomberg Intelligence analyst Kristy Hung said.

“It makes us fear that the scale of the debt crisis is beyond the imagination of any market watcher.”

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Elaine R. Knight