Chinese bond defaults in focus as Modern Land misses payment

HONG KONG • Modern Land China reported a missed payment yesterday, the latest Chinese property developer to do so, adding to worries about spiralling effects of the debt crisis at behemoth China Evergrande Group and dragging on shares in the sector.

China's state planner is set to meet property firms carrying large US dollar-denominated debts later in the day to take stock of their total issuance volume and repayment capability, amid the mounting concerns about liquidity.

Evergrande, which narrowly averted a costly default last week, is reeling under more than US$300 billion (S$404 billion) in liabilities and has a major payment deadline on Friday.

Modern Land, which is based in Beijing and builds energy-saving homes throughout the nation, did not repay either the principal or interest on a US$250 million bond due on Monday, according to a filing yesterday morning.

Chinese borrowers have defaulted on a record of at least US$8.7 billion of offshore bonds so far this year, with the real estate industry accounting for one-third of that amount. That has come as the authorities clamp down on excessive leverage in the real estate sector amid a crisis at Evergrande that has left many investors around the world on edge.

Multiple developers have defaulted this month, though Evergrande made a coupon payment last week before a grace period expired. Still, Evergrande's creditors are bracing themselves for an eventual debt restructuring that could rank among the largest ever in China.

Modern Land last week terminated a proposal to extend the bond's maturity by three months. Fitch Ratings downgraded Modern Land to C from B following the proposed bond extension, considering it a "distressed debt exchange".

Credit-rating downgrades of Chinese developers have accelerated further in October, hitting a record high for a second straight month.

Chinese Estates Holdings said yesterday it would book a loss of HK$288.37 million (S$50 million) in the current financial year from its latest sale of bonds issued by Chinese property developer Kaisa Group Holdings.

Meanwhile, shares of Chinese property shares extended losses, hurt also by concerns over plans to introduce a real estate tax. China's CSI 300 Real Estate Index fell 2.6 per cent, and the Hang Seng Mainland Properties Index slumped nearly 5 per cent.

Shares in China Evergrande Group's electric vehicle (EV) unit rose as much as 5.8 per cent early yesterday, as the cash-strapped developer said it would prioritise the growth of its EV business, before reversing course to slump 3 per cent.

China Evergrande gave up early gains to fall 6 per cent.

REUTERS, BLOOMBERG