Chinese property developer Sunac China  misses deadline for $742M offshore bond payment

Chinese developer Sunac China has missed the deadline for a coupon payments on a $742 million offshore bond and said, it doesn’t expect to make payments coming due on other bonds as well.

The development adds to the wave of defaults in China’s debt-laden property industry.

According to a source close to the company, Sunac China, Beijing’s third-largest property developer by sales, is considering a restructuring of its offshore debt to extend payments; it is also talking to state-owned entities about strategic investments in the firm.

Sunac declined comment.

In a filing with the Hong Kong Stock Exchange, Sunac said, it has hired Houlihan Lokey as a financial advisor and Sidley Austin as a legal adviser to explore solutions to ease current liquidity constraints.

According to data from Duration Finance, Sunac is weighed down by $7.7 billion dollar bonds. It is the fourth-largest issuer among Chinese developers,

China’s property sector is riddled with a series of defaults on offshore debt obligations, with China Evergrande Group being the poster boy for defaulting on offshore debt. The Kaisa Group and Zhongliang Holdings are the latest firm to extend payments.

Sunac’s missing debt repayment accentuates the likelihood of other major developers missing their upcoming obligations or the need to do bond exchanges, opined analysts and developers.

China’s debt crisis has spilled over into the country’s vast property market, with new home sales and construction slumping as financing gets tougher and potential home buyers shy away, fearing stalling of projects.

“The group’s contracted sales have continued to decline significantly, while access to new financing has become increasingly difficult with more liquidity issues occurring among certain property developers,” said Sunac in its filing.

In a separate statement, Sunac said its aggregated sales in March and April fell 65% from a year ago due to COVID-19 outbreaks in various cities, and its refinancing and asset disposal plans did not materialize after a series of rating downgrades earlier this year.

Sunac also confirmed that it missed a deadline for a $29.5 million interest payment that it had to repay last month. It did not pay three other coupons that were due last month totalling $75.3 million, despite a 30-day grace periods.

It apologised to its creditors in the filing and asked them to give it the time “to overcome challenges” while it makes efforts to enhance credit profile, including accelerating sales, disposing of assets, seeking debt extension, and introducing strategic investors.

Since April1, 2022, Sunac’s Hong Kong-listed shares have been suspended pending the release of its 2021 financial statements.

Shares of Sunac Services,  one of its unit, fell by more than 7% on Thursday.

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