Chinese developer Modern Land defaults on bond; property shares drop

27-Oct-2021 Intellasia | Reuters | 5:02 AM Print This Post

Modern Land (1107.HK) has missed a bond payment, the latest Chinese property developer to do so, adding to worries about the wider impact of the debt crisis at behemoth China Evergrande Group (3333.HK), and dragging on shares in the sector.

China’s state planner was set to meet property firms carrying large dollar-denominated debts on Tuesday to take stock of their total issuance volume and repayment capability, amid mounting concern about liquidity.

Modern Land (China) Co Ltd said in a filing that it had not repaid principal and interest on its 12.85 percent senior notes that matured on Monday due to “unexpected liquidity issues”.

The missed payment comes days after the company, a smaller developer, scrapped plans to seek investor consent to extend the maturity date of its bond by three months, saying doing so was not in the best interests of it and its stakeholders.

Ratings agency Fitch earlier this month cut Modern Land’s rating to “C” from “B” over the consent solicitation to change bond terms, saying it considered the move a distressed debt exchange.

Developers are defaulting “one by one”, said an investor with exposure to Chinese high-yield debt, who asked not to be identified as he is not authorised to speak to media.

“The question is always, who’s next?”

This month, Fantasia Holdings Group (1777.HK) defaulted on a maturing dollar bond that heightened concerns in international debt markets, already roiled by worries over whether Evergrande would meet its obligations.

Evergrande, which narrowly averted a costly default last week, is reeling under more than $300 million in liabilities and has a major payment deadline on Friday.

Shares of property developers extended losses, hurt also by concern over China’s plans to introduce a real estate tax.

China’s CSI 300 Real Estate Index (.CSI000952) fell 2.8%, and the Hang Seng Mainland Properties Index (.HSMPI) dropped 4.3%. The broader Hang Seng index (.HSI) edged down 0.4 percent while China’s CSI300 index (.CSI300) slipped 0.3%.

The prospect of contagion and more defaults have weighed on the sector in a major setback for investors.

Chinese Estates Holdings Ltd (0127.HK) said it would book a loss of HK$288.37 million ($2.24 billion) this fiscal year from its latest sale of bonds issued by Chinese property developer Kaisa Group Holdings Ltd (1638.HK).

Modern Land’s 11.8 percent February 2022 bond was down 1.6 percent at a discount of over 80 percent from its face value, yielding about 1,183%, according to data provider Duration Finance.

China Evergrande shares ended the day down more than 4%. Shares in its electric vehicle (EV) unit (0708.HK) closed down 6.75 percent after earlier rising as much as 5.8%, after the developer said it would prioritise the growth of its EV business.


Category: China

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