Chinese developer Shimao fails to repay billion dollar bond

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  • Chinese developer Shimao Group Holdings Ltd. failed to pay a billion dollar bond that matured on Sunday.
  • The company says it has not made principle payments on a number of other offshore debts.
  • The company is one of China’s leading issuers of property-related debt.

Chinese developer Shimao Group Holdings Ltd. said it failed to pay a $1 billion note that matured on Sunday, contributing to a record year of defaults on offshore bonds in the sector.

The luxury carmaker said in a Hong Kong stock exchange filing that it had not made principle payments on a number of other offshore debts and had been in talks with creditors to find “resolutions to amicably”. According to the company, “creditors may have the right to demand accelerated repayment” if Shimao is unable to repay its debts.

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Since the Chinese real estate market has been subjected to an unprecedented wave of delinquencies, the financial health of the company has been a source of growing concern for months. Shimao, the country’s 14th-largest developer by contract sales last year and also a commercial structure builder, defaulted on a private loan last month, a default that heightened fears about hidden costs among builders Chinese.

“Due to market uncertainties regarding debt refinancing and generally difficult operating and financing conditions, the group has experienced negative developments in its credit ratings and the occurrence of major non-payments under certain of its offshore borrowings,” Shimao said in its filing on Sunday.

The company announced in a separate statement that it had sold about 20 additional real estate projects to raise funds. In addition, he anticipates an acceleration of cash inflows from real estate transactions as the real estate market shows signs of recovery. According to China Real Estate Information Corp., new home sales in 30 major Chinese cities rose about 31% in June from May.

Meanwhile, Shimao recruited Admiralty Harbor Capital Ltd. as financial advisor and Sidley Austin as legal advisor to help it assess its capital structure, liquidity and options, according to a filing with the exchange.

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Shimao said it had written support from the majority of its dual currency term lenders. According to the petition, the lenders also said they have no plans to take any enforcement action regarding the funding at this time.

The developer is one of China’s leading issuers of property-related debt. According to data provided by Bloomberg, it has about $10 billion of onshore and offshore bonds outstanding.

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