Wednesday, January 26

Developer Shares Rise, Sunac Asset Sale: Evergrande Update


Shares of China Evergrande Group rose more than 16% on Friday afternoon, briefly putting them on track for their biggest weekly gain of 2021. Meanwhile, Chinese junk dollar bonds continued to rally amid signs that prices are authorities will offer support to alleviate the liquidity crisis in the real estate sector.

China’s banking regulator is set to complete an investigation into the relationship between the property developer and Shengjing Bank Co., the Financial Times reported, citing two unidentified people. Sunac China Holdings Ltd. plans to sell its vast culture and tourism business, according to people familiar with the matter, the latest builder looking to divest assets during an industry-wide liquidity crisis.

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In other developments, Kaisa Group Holdings Ltd. has maturing dollar bond interest payments, while major Chinese builder Yango Group Co. is waiting to know whether the bondholders have agreed to delay payments. Chinese high-yield dollar bonds rose as much as 4 cents on the dollar on Friday, according to credit traders, extending the previous day’s gains after the recent market crash. A gauge of real estate stocks fell 1%, after the biggest two-day gain since 2015 amid short sellers undoing bearish bets.

Key developments:

  • Chinese developer Sunac is said to explore the sale of tourism assets
  • More Chinese real estate firms plan to sell bonds on the interbank market
  • Spills from China market to World Limited, says former adviser to the People’s Bank of China
  • China’s Evergrande-Shengjing Bank probe nears final stages: FT
  • China Junk USD bonds extend gains, up 2-4 cents: traders
  • China developers to see further consolidation in 2022: CBRE
  • China analysts warn of risks to indebted developers: News
  • Chinese developer Yango awaits verdict on debt extension offer
  • Tencent sells 43.9 million shares of HengTen Networks for 86 million Hong Kong dollars

Chinese Developer Sunac Said To Explore Asset Sale (3:55 PM HK)

Sunac China Holdings Ltd. plans to sell its vast culture and tourism business, according to people familiar with the matter, the latest developer looking to divest assets during an industry-wide liquidity crisis.

The Beijing-based company has reached out to some potential buyers of the unit, though the talks are in an early stage and subject to change, said the people, who asked not to be named on private matters. It acquired the assets, which include hotels, resorts and amusement parks, over the past four years for about 65 billion yuan ($ 10 billion). Sunac did not immediately respond to a request for comment.

More Chinese Real Estate Firms Plan Interbank Bond Sales (1:50 p.m. HK)

China Merchants Shekou Industrial Zone Holdings Co. and Bright Real Estate Group Co. are planning to sell bonds next week on the Chinese interbank market, according to public documents.

Poly Developments and Holdings Group Co. announced its own pending offering on Thursday.

China’s Evergrande-Shengjing Bank probe nears final stages: FT (1:25 p.m. HK)

China’s banking regulator is ready to complete an investigation into the relationship between Evergrande and Shengjing Bank, the Financial Times reported, citing two unidentified people. The regulator examined how the bank was exposed to Evergrande’s debts and the role of its chairman, Hui Ka Yan, in the corporate relationship, according to the report.

There appeared to have been potential regulatory violations by both Shengjing and Evergrande above the threshold of allowed debts of a single borrower, the newspaper wrote, citing one of the people.

Spills From China Market To World Limited Says Former Adviser To The People’s Bank Of China (1:10 PM HK)

The financial problems facing institutions like Evergrande are “controllable” and the spillover effects from the nation’s markets to the rest of the world are limited, said a former central bank adviser.

“Foreign investors don’t need to worry too much about China,” Yu Yongding, a former adviser to the People’s Bank of China, said at Caixin’s annual summit on Friday. China’s financial system “is still stable,” according to indicators such as non-performing loans, he said. “The problems of financial institutions like Evergrande are controllable.”

China Junk USD Bonds Spread Gain, Up At Least 2 Cents (9:55 AM HK)

Chinese high-yield dollar bonds were up at least 2 cents on the dollar Friday morning, according to credit traders, extending the previous day’s gains after the recent market crash.

The Times China 6.2% note due 2026 was indicated 7.2 cents higher to 72.3 cents at 9:46 a.m. in Hong Kong, based on prices compiled by Bloomberg.

KWG’s 6% dollar bond due 2026 was indicated with an increase of 3 cents to 71.2 cents, also set for the third consecutive day of earnings that would be the longest streak since mid-October.

China Analysts Warn Of Risks To Indebted Developers: News (7:55 a.m. HK)

Investors should be wary of Chinese property developers who rely heavily on dollar financing despite a sharp rally in their share prices this week, Shanghai Securities News reports, citing Capital Securities analyst Wang Song.

Many of the developers are facing strong repayment pressure in the first half of next year, Wang said. A marginal improvement in China’s credit policy for the industry has boosted investor sentiment recently, but the increase is unlikely. Developer profitability to rebound significantly, the report also quotes Citic Securities analyst Chen Cong.

Chinese Developer Yango Awaits Verdict On Debt Extension Offer (7:30 AM HK)

Major Chinese developer Yango Group Co. will soon know if the bondholders agreed to delay the next payments.

Friday is the deadline for the owners of three separate notes totaling $ 747 million to vote on the debt swap proposed by the Yango Justice International Ltd. unit. Those bonds will be swapped for new notes due in September next year. . The company warned that without more time, “it will not be able to repay” the existing bonds at maturity.

A look at Evergrande’s maturity schedule:

Dollar bonds Coupon expiration date Grace period ends Amount

(A million dollars)

TIANHL 13% due in 2022 November 6th 6th of December 41.93
TIANHL 13.75% due in 2023 November 6th 6th of December 40.56
EVERRE 7.5% due in 2023 December 28th January 27th 50.43
EVERRE 8.75% due in 2025 December 28th January 27th 204.77

© 2021 Bloomberg


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