Chinese property developers’ dollar bonds see indiscriminate sell-off amid growing concerns, many trading below 30 cents
Chinese property developers’ dollar bonds see indiscriminate sell-off amid growing concerns, many trading below 30 cents

Chinese property developers’ dollar bonds see indiscriminate sell-off amid growing concerns, many trading below 30 cents

 

>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<

 

 

The sell-offs in US dollar bonds issued by Chinese property developers deepen this week amid growing concerns about financial health of the sector. Notably, bonds issued by developers widely viewed as financially healthy such as Country Garden, CIFI Holdings, Sinic Holdings also tumbled across the board.

Some developers’ dollar bonds are trading in distressed pricing, below 30 cents, from previous 90 cents in a couple of weeks.

For instance, bonds of various maturities issued by CIFI Holdings tumbled by around 30 cents on the dollar in the past three weeks. Country Garden, the country’s largest property developer by sales, saw its dollar bonds slip by 10 – 30 cents on the dollar during the period.

Chinese developers’ dollar bonds have been in a downtrend since early 2021. Entering 2022, home sales didn’t show notable improvement and developers still faced difficulties in raising funds, leaving many developers no choice but to seek debt payment extension.

In particular, market concerns intensified this week after homebuyers of nearly 100 property projects across China refused to pay mortgages as the properties they purchased were left unfinished. Read more …

After the recent mortgage defaults, banks could reevaluate mortgage risks and become more cautious in granting such loans and even tighten the quota of the loans, said industry insiders.

On July 12, developers’ dollar bonds tumbled across the board. “Even those with high credit rating and private developers with strong fundamentals plummeted. Perpetual bonds issued by CIFI holdings tumbled to 30 cents on the dollar from 70 cents in less that two weeks. The sell-off seems stronger than the one in March this year when the sector face this year’s first maturities wall,” said a property bond investor.

The sell-off continued on July 13, with bonds of several developers that hadn’t defaulted on debt slipped below 30 cents to hit new record lows, while bonds of those which had already defaulted diving to single-digit price. Bonds of developers with investment grade also recorded the biggest one-day plunge in several months.

According to data from DM, the five private property developers widely viewed as the most financially health – CIFI Holdings, Country Garden Longfor Properties, Sinic Holdings and Yanlord Land – saw most of their dollar bonds slip by 13 – 15 cents on the dollar in the past three weeks.

“Prices of 30 cents have become a normal, even for relatively healthy developers,” said a bond investor. DM data showed that Country’s Garden’s long-end dollar bond dropped below 30 cents on July 13 to hit 27 cents.

“In recent months, the government’s intention to let banks support the real estate market and restore market confidence has become clear, but still, we expects investors and banks to remain cautious in supporting the real estate sector and do it in a selected way,” said Chen Chen, a senior analyst at Moody’s Investors Service.

“The market will see more debt defaults this year, in particular by developers with a large amount of offshore debt maturities and weak liquidity condition.”

Moody’s Investors Service said that its rated developers raised only $2.7 billion from offshore bonds and $12 billion from onshore bonds in the first half of the year, significantly lower than $21 billion and $17.6 billion in the same period last year.

In the next 12 months, the developers will see $32.6 billion dollar bonds and about $29.9 billion of onshore bonds come due or become puttable, it said.