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Tuesday, September 27, 2022

The Evergrande crisis is spreading. Here are other Chinese property developers that are in default or wobbling.


Evergrande is teetering on the brink of default.

China’s property developers have grown at breakneck speed over the last decade, powered by huge amounts of debt. Authorities have started to rein them in with strict debt limits, but snapping an addiction isn’t easy.

Evergrande is one of China’s biggest property developers and among the most indebted companies in the world, owing more than $300 billion. It’s creaking under the pressure and has recently failed to make numerous offshore bond payments.

Just before a 30-day grace period was set to expire, Evergrande wired $83.5 million Thursday to pay interest on an offshore dollar bond. But it faces more deadlines around missed bond payments, and $45.2 million in interest is due later in October. If Evergrande fails to cough up it will officially be in default.

The Evergrande crisis is now spreading to other developers and threatens to rock China’s real estate sector, which economists say makes up around 30% of the economy.


Pan Jun Fantasia property developer China
Pan Jun is Fantasia’s chairman.

Perhaps the most worrying default so far has been mid-sized developer Fantasia. Earlier this month it failed to pay a $206 million dollar bond maturing on October 4, according to a filing.

The default was troubling because the company had reassured investors only two weeks earlier that there was no liquidity issue, said Craig Botham, chief China economist at Pantheon Macroeconomics.

“A great many Chinese developers are in more fragile positions than their balance sheets might suggest,” he said.

Fantasia is smaller than Evergrande, with revenue of $2.76 billion in 2019, compared with Evergrande’s $69.15 billion, according to Bloomberg data.

Sinic Holdings

Sinic Holdings China property developer
Sinic Holdings defaulted on a bond payment on Monday.

Sinic Holdings defaulted on a bond and interest payments worth $250 million on Monday, Bloomberg reported. It’s another mid-sized property developer with revenue of $3.91 billion in 2019.

Evergrande-related stress has slowed sales in the property sector and driven up borrowing costs, adding to pressure on developers like Sinic.

The yield on riskier Chinese dollar bonds – which are big sources of funding for developers – soared to 20% earlier this month.

Fitch Ratings downgraded Sinic to “restricted default” on Thursday.

China Properties Group

Wong Sai Chung China Properties Group CPG China developer
Wong Sai Chung is managing director of CPG.

China Properties Group is considerably smaller than Sinic, but it is also in trouble. It said on  October 15 that it had defaulted on bonds worth $226 million, in a filing on the Hong Kong stock exchange.

There’s likely to be little respite for developers this year, according to UBS. The bank’s analysts said in a note Monday that it expects new property starts to tumble 20% year-on-year in the fourth quarter, “bringing further downward pressure on the economy.”

Modern Land

China property Evergrande
Modern Land is yet another developer under pressure.

Modern Land earlier in October asked to delay payment of a $250 million bond for three months to January, saying it wanted to take measures to “avoid any potential payment default.”

Yet the mid-sized developer, which owns 200 apartment and office properties across China, scrapped those plans late Wednesday. It said in a filing it is facing liquidity problems and is seeking to hire financial advisers.

The chairman and president of Modern Land have said they’ll pump around $123 million into the company.

Xinyuan Real Estate

China property developer construction
Xinyuan has been forced into a distressed debt swap.

Pressure on Xinyuan led it to swap $208 million of dollar bonds with debt that matures in two years’ time, in a distressed-debt exchange.

The ratings agency Fitch gave Xinyuan a “CC” score on Wednesday, meaning some kind of default is probable. Fitch said the mid-sized developer faces a “tight liquidity situation, with weak funding access and large offshore bond maturities in the next twelve months.”

Greenland Holding Group

Greenland Holding Group China construction property developer
Greenland is among the biggest property developers in China.

S&P Global Ratings earlier this month downgraded Greenland, a massive developer with revenues of $61.98 billion in 2019. It got a “B+”, meaning it’s currently able to pay its debts but is vulnerable to a shock.

Greenland is struggling as its borrowing costs shoot higher during the Evergrande crisis, with domestic and foreign investors now much less keen to lend to property companies.

“The company’s cash could continue to deplete over the next 12 months due to weaker sales and cash collection,” S&P said.

Insider contacted all the property developers mentioned in this article for comment but none responded.


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