Business Maverick

Business Maverick

Zhenro Default Gives Investors Reality Check: Evergrande Update

Residential buildings at a Zhenro Properties Group Ltd. development in the Jinshan district of Shanghai, China, on Thursday, Feb. 24, 2022. Zhenro is asking bondholders for more time to pay back about $1 billion in debts due to mature this year, citing liquidity pressure. Photographer: Qilai Shen/Bloomberg

Zhenro Properties Group Ltd defaulted for the first time in a reality check for investors after a three-week rally in Chinese builder stocks and bonds.

The developer said it was unable to pay interest on two dollar bonds before a grace period ended on Saturday and warned it might not be able to meet three other coupons because of its liquidity woes. China’s high-yield dollar bonds fell 0.5 to 2 cents on the dollar Monday, according to credit traders. A gauge of property developer shares sank as much as 4.4%, in line with a broader sell-off amid concerns about inflation and tightening monetary policy.

Meanwhile, embattled developer Fantasia Holdings Group Co. and its Colour Life unit said they plan to review their business, including possible asset disposals, with help from a Guangdong state-backed firm.

Zhenro's dollar bonds are trading at distressed levels

China Developer Shares Fall as Lockdown Dims Outlook for Sales 

A Bloomberg gauge of Chinese real estate firms dropped as much as 4.4% as a prolonged lockdown in Shanghai raised fresh concerns over the sector’s contracted sales and rental income.

China Fortune Land Development Co. slumped by the 10% daily limit, while KWG Group Holdings Ltd., Times China Holdings Ltd. and Logan Group Co. were each down as much as 10%. Seazen Group Ltd. and Country Garden Holdings Co. also dropped.

“Shanghai’s Covid outbreak is hurting both property sales and rental income of shopping malls,” said Patrick Wong, an analyst at Bloomberg Intelligence.

China Junk Dollar Bonds 0.5-2 Cents Lower After Three-Week Rally

Chinese high-yield dollar bonds fell 0.5 to 2 cents on the dollar Monday, credit traders said, after delivering three weekly gains according to a Bloomberg index.

Country Garden’s 8% dollar bond due 2024 dropped 3.1 cents to 85.1 cents as of 10:03 a.m. in Hong Kong, the biggest decline since March 24, according to Bloomberg-compiled prices.

CIFI Holdings Group Co.’s 5.5% note due 2023 fell 1.4 cents to 92.7 cents, the sharpest drop since March 15.

Fantasia to Review Debt With Guangdong Govt-Backed Firm

Fantasia Holdings Group Co. and its majority-owned Colour Life property management arm entered agreements with Gortune Alternative Fund Management to conduct a review on the financial position and formulate plans for possible asset disposals, according to a Hong Kong stock exchange filing.

Gortune Alternative is 40%-held by its single largest shareholder Gortune Investment, which was set up in 2016 under the Guangdong government’s guidance. Gortune Alternative will also promote implementation of the overall debt restructuring plan and facilitate communication with Fantasia Group’s creditors.

Zhenro Defaults After Missed Interest Payments

The Chinese builder, which in February asked holders of about $1 billion of bonds set to mature this year for more time to repay, said in a Hong Kong stock exchange filing Sunday it didn’t pay a combined $20.4 million of interest on two dollar bonds. That has resulted in events of default, according to the company.

Zhenro also said it might not be able to pay a combined $32.6 million of interest due on three other dollar bonds before grace periods end between April 10 and May 14. Failure to meet the obligations would also constitute events of default, the company said. However, the firm said it intends to pay the interest due on all five notes by May 31. BM

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