Evergrande crisis: distressed exchanges, default waivers build as Chinese developers wonder, where’s the policy stimulus?
- Zhenro and Jingrui are joining other cash-strapped developers in delaying debt repayments, weakening bond covenants
- China’s housing market is facing the worst slowdown in a decade after a months-long decline in home sales
The two developers this week sought to delay repayments on dollar-denominated bonds worth US$1.2 billion maturing this year, citing a liquidity squeeze. They are also asking bondholders to waive some default clauses on US$3.5 billion of notes, weakening their covenants.
The latest troubles suggest efforts by policymakers to pump liquidity and ease borrowing costs have not come fast enough to relieve their burden. Others believe the measures are not aimed at bailing out the nation’s indebted developers even as many have been shut out of bank and bond-market financing.
“Bond market access will remain difficult for the sector as bond price volatility remains high and investors’ and lenders’ risk appetite stays low,” said Kelly Chen, an assistant vice-president and analyst at Moody’s. “Thus, it will increase refinancing risk for financially weak developers in particular.”
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Chinese real estate giants Evergrande and Kaisa continue unloading assets to cover debt
Before Zhenro and Jingrui, peers including Guangzhou R&F Properties, Kaisa Group and Yuzhou Group had also embarked on a similar debt management strategy to delay reckoning or sidestep defaults.
