12 oct 2021 17:54 GMT
High-yield bond markets were rocked amid heightened financial pressure on the construction industry in the Asian country.
The Chinese real estate giant Evergrande has defaulted on the payment of a total of 148 million dollars of interest that it should have paid to the bondholders until noon this Tuesday (Hong Kong time), reports the Financial Times, which has spoken with two people aware of the company’s latest default.
With the bonds trading at 21-22 cents, the liquidity crisis facing the construction company has affected the entire Chinese real estate sector, where sales slow and financial pressure on the industry increases.
This Monday another Chinese real estate company, Sinic Holdings, anticipated that it also suffers “financial challenges” that will prevent it from paying on time what it owes to its offshore bondholders due to lack of liquidity. The deadline for making the final payment of $ 250 million and a 9.5% profitability falls on October 18, but the company explained in the statement that “it will not have sufficient financial resources” to meet its obligations.
Since last Friday, the ICE index that tracks Chinese corporate issuers in the Asian market of high yield dollar bonds has shown that these junk bonds, with a high risk of default, have soared to 22%, which highest since 2009.
In addition to Evergrande and Sinic Holdigs, whose bonds reached about 25 cents after the last announcement, two other Chinese real estate companies, Fantasia and Modern Land, also warned of the need to extend the payment deadline.
- Chinese real estate companies are experiencing problems repaying loans after Chinese regulators last year introduced limits on the use of borrowed money. This has fueled fears of possible defaults and instability in financial markets.
- Investors fear that Evergrande, which is already defaulting on its payments to foreign bondholders but has not yet declared itself in default, could collapse with 2 trillion yuan ($ 310 billion) of debt.
- Hundreds of smaller Chinese real estate companies have gone bankrupt since regulators began tightening financial control over the industry in 2017 amid concerns about its mounting debt and the possible risk of a financial crisis.
With AP information