HONG KONG/SHANGHAI – Cash-strapped Chinese developers try to find new terms to work with bondholders. Shimao Group is the most recent, while Yuzhou Group seeks extensions for their matured debt.

Markets are also monitoring the outcomes of China Evergrande Group’s meeting with offshore bondholders. The voting period for approving an extension expires on Thursday. Despite having made payments for onshore bonds, the firm defaulted on offshore bonds.

The world’s largest property company, with over $300 billion of liabilities, is asking for a delay of six months in redemption and coupon payments on a bond worth 4.5 billion yuan ($157million).

Chinese developers face an unprecedented liquidity crunch due to decades of regulation on borrowing. This has led to numerous offshore debt defaults, credit rating downgrades, and sales of developers’ bonds and shares.

In its economic outlook report, the World Bank stated earlier this week that a serious and long-lasting downturn of China’s realty sector could have profound effects on China’s economy. This is because China’s developers are responsible for almost 30% GDP.

There are potential dangers and consequences of contagion due to a rapid deleveraging by large Chinese property firms.

According to documents obtained Thursday by Reuters, Shimao in Shanghai will host online meetings with two creditors (ABS and asset-backed securities) on January 17, for the purpose of voting on extension requests.

According to documents and sources, the two offshore ABS products, which are worth 1.17 billion Yuan ($183.91 millions) each, will mature in the latter part of the month. Shimao wants to extend payment deadlines until 2022, while also making certain payments before that new deadline.

Yuzhou was founded in Xiamen on the east coast. It also offered an exchange for two 2022-dollar bonds. The total value of the offer is $582 million. This will allow Yuzhou to increase the maturity by one year and avoid default.

Yuzhou indicated that the company expects delays in $110million in coupon payments. These are due in January or February. To amend its terms, it is asking for consent from all holders of $4.5 billion bonds. This would allow it to avoid defaults in the event that other bondholders request repayment.

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Nomura predicts that the sector’s cash crunch will intensify, with companies needing to meet offshore and onshore maturities in excess of 210 billion Yuan per each during the first quarter and the second quarter. This is up from 191 million yuan for the fourth quarter in 2021.

Developers need funds urgently to repay their debt.

Sunac China Holdings Ltd announced on Thursday that the company would generate $580.1million through shares sales.

According to media reports, shares worth 110 millions yuan were frozen in Shenzhen by a court.

Sunac stated that the report was due to “minor disputes” between partners and the firm. But, they have reached an agreement and will unfreeze shares.

A separate developer Agile Group pledged 65.6 Million shares of its property management unit A-Living Smart City Services to a smaller investor on Jan. 6, for an unknown amount, a stock exchange filing revealed.

The shares of Chinese developers were generally lower on Thursday with Sunac and Agile falling 19% & 12% respectively by mid-afternoon. Shimao dropped 7.6% and Yuzhou lost 7%. Evergrande fell 3%.

A Yuzhou-denominated bond fell by 21.8% the morning before being stopped.

Shanghai Shimao temporarily suspended two Shanghai-traded bonds, however they have risen to more than 30%.

($1 = 6.3610 )