Sunac, China’s fourth-largest developer by sales, will delay payment of a $345 million onshore bond due Monday, sources say

Highly indebted Chinese property developer Sunac China hopes to extend the maturity of an onshore bond soon.

China’s fourth-largest developer by sales, Sunac plans to meet with creditors this week and offer a deferral of payment on a 2.3 billion yuan ($345 million) bond due next Monday, sources said late Wednesday. .

He wants to repay the principal in four installments over the next two years, they added. It will repay 10%, 15%, 20% and 55% of the principal of the yuan-denominated bond every six months until June 13, 2024.

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As for interest, the company chaired by Chinese real estate tycoon Sun Hongbin will offer to pay interest only on the June 13 deadline. Interest, at an unchanged coupon rate of 7%, will be paid semi-annually over both years as well.

Sunac pays local bondholders after defaulting on dollar notes

The developer failed to pay $29.5 million in interest on a US dollar bond earlier and was in default after a 30-day grace period on May 12. He also said in a Hong Kong stock exchange filing the same day that he did. do not expect to make payments on three additional tickets.

China’s “three red lines”, measures in place since August 2020 to control systemic risk posed by weak property developers, have sent the industry into a meltdown not seen since the 2015 stock market crash.

As a result, more developers are joining China Evergrande Group and Kaisa Group Holdings on a list of companies defaulting on debt. Jinke Property Group extended the payment deadline for its 1.24 billion yuan onshore bond on May 30 and avoided default, while Shanghai government-backed real estate firm Greenland Holdings also sought to extend a bond. a year this month.

In recent months, the Chinese central government has introduced a number of policies to support the sector, while more than 100 municipal governments have eased restrictions on property sales and purchases, lowering the down payment rate and increasing the quota of loans for the purchase of housing.

However, market watchers do not expect a strong recovery from China’s battered real estate sector any time soon.

“These measures will support real estate demand and help reduce the decline in sales nationwide…Nevertheless, it will likely take time for these policies to take effect,” said Moody’s analyst Daniel Zhou.

One of the country’s top developers, with a strong presence in major cities such as Beijing, Shanghai and Shenzhen, Sunac sold just 12.85 billion yuan worth of homes in May. That’s down 82% from a year ago and down 6% from the 13.6 billion yuan worth of homes sold in April.

Trading in the company’s shares has been suspended since April 1, after Sunac failed to deliver its annual results by March 31, as required by the Hong Kong stock exchange.

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Elaine R. Knight