Chinese developer Shimao puts all projects on sale

HONG KONG • Shimao Group Holdings has put all its projects on sale, the local media reported, as Chinese property developers face mounting pressure to negotiate with their creditors to ease a liquidity squeeze in the sector that is threatening to push more firms into default.

China Evergrande Group, the world's most indebted developer, is seeking a six-month delay in the redemption and coupon payments of a 4.5 billion yuan (S$956 million) bond in a meeting with bond holders. The outcome of the meeting was expected late yesterday.

Evergrande is struggling to repay more than US$300 billion (S$406 billion) in liabilities, including nearly US$20 billion of offshore bonds deemed in cross-default by ratings agencies last month after it missed payments.

Reuters reported last week that China will make it easier for state-backed property developers to buy up distressed assets of debt-laden private peers, another step by policymakers to avert a liquidity crisis in the sector.

Shimao, a smaller peer which defaulted on a trust loan last week, has put on sale all of its real estate projects, including both residential and commercial properties, Caixin reported at the weekend.

The Shanghai-based property developer has struck a preliminary deal with a Chinese state-owned company to sell its Shimao International Plaza Shanghai, a commercial property in Shanghai's Nanjing Road, for more than 10 billion yuan, the report said.

Daiwa Securities said in a research report that Shimao will find itself in a vicious circle of liquidity issues given the recent negative news, even though the firm said it is not in debt servicing default.

Shimao unit Shanghai Shimao Construction said last Friday that it was in talks with China Credit Trust to resolve a US$101 million defaulted loan payment.

Reuters also reported on the same day that the unit has proposed extensions on maturities for two asset-backed securities due this month totalling 1.17 billion yuan.

"We believe negative publicity will erode the confidence of home buyers and investors," Daiwa said. "This, in turn, would negatively impact Shimao's future refinancing activities and contract sales prospects and lead to further deteriorating cash flows and liquidity."

It estimates Shimao has around 23 billion yuan to 25 billion yuan in corporate bonds, asset-backed securities and trust loans due for payment this year, noting that it has only 16.1 billion yuan in cash.

Chinese developers are facing an unprecedented liquidity squeeze due to years of regulatory curbs on borrowing, leading to a string of offshore debt defaults, credit rating downgrades and sell-offs in developers' shares and bonds.

Small developer Modern Land, which has missed payment for its 12.85 per cent notes due on Oct 25 last year, said in a filing yesterday it has received notices from certain note holders demanding early repayment of their senior notes.

The developer said it has been in discussion with these creditors for a waiver and it has appointed financial advisers to formulate an overall plan for feasible remediation actions.

The firm is also in talks with note holders on a restructuring plan for its US$1.3 billion of offshore bonds, it added.

Mr Kingston Lin, managing director of the asset management department at Canfield Securities, said: "It's going to be the peak of the repayment period and we'll see more developers default."

Modern Land shares, which have been suspended since Oct 21 last year, sank nearly 40 per cent yesterday to 23 Hong Kong cents, a historical low.

Evergrande's shares closed flat yesterday, while Shimao's shares ended 19 per cent higher.

REUTERS