Record China’s flaws in focus as modern lands lack payment
(Bloomberg) – A Chinese developer of real estate projects using green technologies has become the latest builder to default on debt payments, just as the country’s borrower defaults on offshore bonds hit a record high.
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Modern Land China Co., which is based in Beijing and builds energy-efficient homes across the country, has not repaid principal or interest on a $ 250 million bond due Monday, according to a document filed Tuesday. morning. The company is working with legal counsel Sidley Austin and plans to hire independent financial advisers in the near future, according to the filing. Modern Land attempted divestments, loans and additions from strategic investors before failing to make the payment, Chinese financial platform Cailian reported.
Chinese borrowers have defaulted on a record at least $ 8.7 billion in offshore bonds so far this year, with the real estate sector accounting for a third of that amount. It came as authorities crack down on excessive leverage in the real estate sector amid a crisis within the China Evergrande group that has left many investors around the world.
Several developers defaulted this month, although Evergrande made a coupon payment last week before a grace period expired. Still, Evergrande’s creditors are bracing for a possible debt restructuring that could be among the biggest ever in China.
Modern Land last week ended a proposal to extend the bond’s maturity by three months. Fitch Ratings downgraded Modern Land from B to C following the proposed bond extension, seeing it as a “troubled debt swap”.
Chinese developer credit rating downgrades accelerated further in October, hitting an all-time high for a second consecutive month. There have been 44 cuts in the sector by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings as of October 21, after 34 downgrades for the entire month of September, according to data compiled by Bloomberg.
Rating downgrades surged in the third quarter as China Evergrande Group’s troubles fueled broader debt concerns. The ongoing downgrades, occurring as developers face strong operational and refinancing pressures, “will worsen their ability to raise funds,” said Ma Dong, partner of Chinese bond firm BG Capital Management Ltd.
The surge in Chinese garbage-rated debt yields, which recently hit its highest in a decade at 20%, is also hampering capital raising and causing the country’s developers to account for nearly half of dollar bonds. struggling in the world. Still, a media representative from Ronshine China Holdings Ltd. told Bloomberg that the developer paid the $ 30.2 million in interest owed Monday on a dollar bond. Peer Agile Group Holdings Ltd. stated that they have sufficient funds to meet the upcoming debt maturities.
(Add Cailian report in second paragraph and context in last paragraph.)
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