Shimao puts residential projects up for sale as China’s real estate problems worsen

A man walks past a wall bearing the Shimao Group logo, with residential buildings and the Pudong financial district in the background, in Shanghai, China on January 1, 2013. Photo taken on January 1, 2013. REUTERS / Stringer

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  • Shimao puts all residential and commercial assets up for sale – Caixin
  • Evergrande’s onshore bondholders to decide on extension
  • Some Modern Land offshore bondholders require early redemption
  • Latest developments highlight the worsening debt crisis in the sector

HONG KONG, Jan. 10 (Reuters) – Shimao has put all of its projects up for sale, local media reported, as Chinese real estate developers face increasing pressure to negotiate with their creditors to alleviate the cash crunch in the sector that threatens to push more companies to default.

China Evergrande Group (3333.HK), the world’s most indebted developer, is asking for six months to redeem and pay off coupons on a 4.5 billion yuan ($ 157 million) bond during ‘a meeting with the bondholders. The outcome of the meeting is expected later Monday. Read more

Evergrande is struggling to repay more than $ 300 billion in liabilities, including nearly $ 20 billion in offshore bonds deemed to be cross-defaulted by rating agencies last month after missing payments. Read more

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Reuters reported last week that China will make it easier for state-backed real estate developers to buy distressed assets from indebted private peers, another step taken by policymakers to avoid a liquidity crunch in the sector. Read more

Smaller counterpart Shimao Group Holdings (0813.HK), which defaulted on a fiat loan last week, has put all of its real estate projects, including residential and commercial properties, up for sale, Caixin reported over the weekend. Read more

The Shanghai-based real estate developer has reached a preliminary deal with a Chinese state-owned company to sell its Shimao International Plaza Shanghai, a commercial property on Nanjing Street in Shanghai, for more than 10 billion yuan, according to the report.

The company did not respond to a request for comment.

Daiwa said in a research report that Shimao would find itself in a vicious cycle of liquidity problems given the recent negative news, even though the company said it was not in default of debt service.

Shimao’s unit, Shanghai Shimao Construction, said on Friday it was in talks with China Credit Trust to resolve a $ 101 million default.

The missed payment from the trust would not speed up payment requests in the open bond market, he added.

Reuters also announced on the same day that the unit had offered maturity extensions for two asset-backed securities (ABS) maturing this month, for a total amount of 1.17 billion yuan (183.50 million of dollars). Read more

“We believe that negative publicity will erode the confidence of buyers and investors,” Daiwa said. “This, in turn, would negatively impact Shimao’s future refinancing activities and contract sales prospects and lead to further deterioration in cash flow and liquidity. “

He estimates that Shimao has around 23 to 25 billion yuan of corporate bonds, ABS and fiat loans payable in 2022, noting that it only has 16.1 billion yuan in cash.

LIQUIDITY CRISIS

Chinese developers face unprecedented cash shortage due to years of regulatory restrictions on borrowing, leading to a series of overseas defaults, credit rating downgrades and sales of stocks and bonds developers.

Small developer Modern Land (1107.HK), which defaulted on payment of its 12.85% tickets due on October 25, 2021, said in a document Monday that it had received notices from some noteholders demanding the early redemption of their senior tickets.

The developer said it has been in discussions with these creditors for a waiver and has appointed financial advisers to formulate a comprehensive plan of feasible remedies.

The company is also in talks with noteholders over a plan to restructure its $ 1.3 billion offshore bonds, he added.

“This will be the peak of the payback period and we will see more developers default,” said Kington Lin, managing director of the asset management department at Canfield Securities Limited.

“The market is looking at how many SOEs will get more M&A loans to help struggling developers.”

Modern Land shares, suspended since October 21, fell nearly 40% Monday morning to HK $ 0.23, an all-time low.

At 03:35 GMT, shares of Evergrande fell 3.4%, while Shimao gained 3%.

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Reporting by Clare Jim and Donny Kwok in Hong Kong, Samuel Shen in Shanghai; Editing by Kim Coghill & Shri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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