Shimao bonds, shares sag on new signs of liquidity stress

SHANGHAI • Shares and bonds of Shimao Group tumbled yesterday after a trustee said roughly US$170 million (S$230 million) worth of asset-backed notes guaranteed by the Chinese developer may not be redeemed on maturity.

Investor confidence was also hit by a Moody's downgrade of Shimao's rating, highlighting the debt travails bedevilling some bloated developers despite targeted policy easing by Beijing to prevent a hard landing for the industry.

Shimao's Hong Kong-listed shares slumped more than 9 per cent in morning trading to a one-month low.

A Shimao bond tumbled 22 per cent in Shanghai, the biggest decliner in the city's exchange market for corporate bonds.

Several other Shanghai-traded bonds issued by Shimao fell more than 6 per cent.

Some 1.1 billion yuan (S$230 million) of asset-backed notes guaranteed by Shimao may not be redeemed when they mature next month, trustee Yunnan International Trust said in a filing that was disclosed on Wednesday.

Also on Wednesday, Moody's downgraded Shimao's corporate family rating again, citing the firm's heightened liquidity risks over the next six to 12 months. It changed Shimao's outlook to negative from ratings under review.

China stepped up its deleveraging campaign last year against heavily indebted developers, driving the industry into a liquidity crisis. Although it has taken a series of measures recently to revive confidence in a sector suffering from falling prices and slumping sales, there is no sign that Beijing will reverse its deleveraging policies.

REUTERS