Chinese private developers are cash-hungry ahead of debt repayment rush


(Yicai Global) June 28 – China’s private property developers are resorting to desperate means such as expensive loans and asset sales ahead of an impending peak season for debt repayment.

China’s top 200 developers have CNY175.5 billion ($26.2 billion) in bonds due this month and next month, 67% of which are issued by private builders, according to the latest data from the CRIC Research Center. In addition, foreign bonds account for 56 percent of the 117.6 billion yuan owed by private companies in the second half of this year.

Builders are scrambling to meet debt, extending repayment periods, accepting sky-high interest rates and, as a last resort, even selling off assets amid slow sales and a government crackdown on excessive borrowing promoters.

The situation is particularly difficult for small businesses because the rebound in sales is not enough to cover bills and it is not easy to borrow. Most developers who issued bonds from January to April were state-owned, according to statistics from the China Index Academy. Private companies only sold eight bonds.

Some private builders have defaulted, affecting the banking industry’s valuation of these types of companies, a senior developer official said at an investor meeting hosted by the Shanghai Stock Exchange last month. . As a result, two major lenders, former partners of the builder, no longer buy the bonds of private landowners. The company sold two bonds between February and May, but felt the market pinch on the second issue, he added.

The funding environment for private developers hasn’t improved much yet, as mortgages are basically the only approach left for them to raise funds, a fixed income analyst at Yicai Global said.

Some are willing to trade almost anything for cash. Guangzhou-based Agile Group Holdings recently signed an agreement to borrow up to 894 million HKD (113.9 million USD) over 24 months at an annual interest rate of 20%, using land on King’s Road, Hong Kong, as collateral.

“Private real estate companies need to get money if they want to survive the current difficulties,” Dennis Huang, managing director of Wilson Capital International, told Yicai Global. “It doesn’t matter whether interest rates are high or not.” According to the fixed income analyst, other private builders are also looking for financing similar to Agile.

Editors: Tang Shihua, Emmi Laine, Xiao Yi


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