Major China developer Sunac misses bond coupon payment as crisis spreads

Sunac is the biggest developer to miss a public bond payment this year. PHOTO: BLOOMBERG

HONG KONG (BLOOMBERG) - Sunac China Holdings did not pay a dollar-bond coupon before a Wednesday (May 11) deadline and does not expect to make payments on other notes, becoming one of the biggest Chinese property companies to renege on its obligations amid a record-breaking wave of defaults.

China's fourth-largest developer said in a filing to the Hong Kong stock exchange that its ability to access new financing has remained difficult, and has been compounded by a recent Covid-19 outbreak in the country that deepened an industry sales slump.

Sunac has appointed legal and financial advisers to help assess the firm's capital structure and liquidity, according to the filing.

China's property sector has been grappling with a debt crisis since last year, following a nationwide crackdown on excessive leverage and a string of defaults.

More than a dozen builders have missed offshore note payments, including giant China Evergrande Group.

High-yield dollar bonds from Chinese issuers - the bulk of which come from property firms - are extending losses after dropping for a record eight straight months through April.

Sunac is the biggest developer to miss a public bond payment this year. The development is fueling concerns about a new wave of debt failures among real estate companies that until just several months ago were considered safer borrowers.

Some of Sunac's dollar bonds were indicated above 80 cents on the dollar as recently as February. They are now below 30 cents.

Sunac missed an initial deadline last month for a US$29.5 million (S$41 million) coupon payment on its 7.95 per cent dollar bond maturing 2023, and had a 30-day grace period that expired on Wednesday.

That opens the possibility of it being declared in default on the obligation, and could trigger cross-default on other offshore debt, the note's prospectus shows.

The payment in question was the first of four dollar-bond coupons initially due last month but which holders have told Bloomberg News were not paid.

Sunac has been in the spotlight for months. It has US$7.7 billion of dollar bonds outstanding - among the highest for Chinese developers, according to Bloomberg-compiled data.

Its shares and dollar bonds have plunged some 80 per cent since September, when a subsidiary's letter to a local government requesting "special policy support" became public.

Sunac raised HK$7.4 billion (S$1.3 billion) in November from selling stock and a stake in its property-management unit. At the same time, controlling shareholder and chairman Sun Hongbin provided a US$450 million interest-free personal loan to Sunac, among numerous property tycoons going into their own pockets to aid their firms.

The developer, which still has not released 2021 results, reached a debt-payment crossroads this quarter after repeated downgrades from credit raters. It was able to push out over 18 months a four billion yuan (S$827 million) payment due April 1.

The first 10 per cent of that bond's principal repayments is due on May 15, before three other dollar-bond coupons' grace periods end.

Meanwhile, a 1.44 billion yuan note is set to mature on June 13.

Join ST's Telegram channel and get the latest breaking news delivered to you.