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China property sector woes deepen as markets await Evergrande deal By Reuters


© Reuters. FILE PHOTO – Police officers and security staff walk past the China Evergrande Group headquarters in Shenzhen (Guangdong Province, China), September 30, 2021. REUTERS/Aly Song

By Clare Jim

HONG KONG (Reuters – Investors were abuzz Tuesday over the possible sale by China Evergrande Group of a stake at a unit that could raise $5 billion. More Chinese property developers struggled to cope with rating downgrades due to worries about how they would repay their debt.

Evergrande, which has more than 300 billion in debts, is currently facing the largest ever default. Last month, coupon payments for two-dollar bond tranches were not made by Evergrande.

As China’s debt-laden counterparts are downgraded due to looming defaults, concerns have been raised about the possible collapse of China’s largest borrower.

Fitch Ratings recently downgraded Sinic Holdings Group Co Ltd, a Chinese developer, due to uncertainties over repayments of the $246 million bond maturing in Oct 18.

Fitch reported that Sinic’s long term issuer default rating of ‘C’ was lowered to ‘C” from ‘CCC. This came after Sinic announced that some subsidiaries had missed interest payments under onshore financing agreements.

Reuters was unable to reach Sinic for comment immediately.

Evergrande was China’s number one-selling developer. The company is now in the midst of uncertainty and will be the focus of China’s largest restructuring efforts.

On Monday, the company requested that trading in Hong Kong of its shares be halted pending announcements about major transactions. Evergrande Property Services Group (a spin-off that was listed last year) also requested a stop and stated it refers to “a possible general sale for shares of company”.

China’s state-owned Global Times reported that Hopson Development had purchased a 51% stake for more than HK$40 million ($5.1 billion). Other media reports have not been cited. Hopson said that it has suspended its shares in the midst of an announcement about a significant acquisition by a Hong Kong-listed company and possibly a mandatory offer.

Evergrande spokesperson didn’t immediately reply to my request for comment.

Fantasia Holdings, the Chinese homebuilder lost more than half its dollar-denominated bond market value after it claimed it hadn’t made a payment of $206 million in international market debt on time.

According to the statement by the property developer, it said that the non-payment could have an impact on the financial condition of the group.

The index of China’s high-yield, or developer-issuer-dominated, debt has fallen to its lowest level since 2020, when the pandemic drawdown began. It is now down almost 20% from May, while similar U.S. indexes and European ones have rallied.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.