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Top 2 Chinese real estate developers miss bond payment over debt concerns

Bloomberg reported that top China real estate developer, Yango Group, missed a 30-day grace period payment on a total of $27.3 million in interest due on Jan. 15.

According to Bloomberg-compiled pricing, the company’s new bond, due in September, is down 2.1 cents on the dollar at 14.3 cents.

The missed payment came after two months when its parent company Fujian Yango Group., announced that it had failed to pay interest on a dollar bond.

This is not the first time the company has had liquidity problems.

On Feb. 8, Bloomberg cited a statement on Chinamoney’s website that investors who hold a 6.92% yuan bond due 2025 had a meeting to discuss a revised plan to prolong a coupon payment initially scheduled for Jan. 29, as Yango suggests.

On the same day, Yango Group became the focus of attention when domestic credit rating agencies consecutively downgraded it.

Dagong Global Credit downgraded Yango to BBB from AA+, with the outlook remaining negative. Earlier this month, Golden Credit Rating International Co. also lowered Yango’s rating to BBB from AA, citing the developer’s expected 2021 net loss and delayed bond repayment due last month.

Data from China Real Estate Information Corp. showed that Yango had the 19th largest sales in 2021. The company operates in over 100 cities across China.

Yango Group peer, Zhenro, is in the same trouble. According to China Real Estate Information Corp, Zhenro is China’s 30th largest builder by contracted sales in 2021.

According to the filing late Friday, the Shanghai-based developer is soliciting the consent of creditors “to certain proposed waiver and amendments” to help improve its overall finances.

Last Thursday, Zhenro told investors that its plan to call the bond remained unchanged after the news that the company won’t buy back a heavy load of $200 million bonds next month.

The company’s reassurance did not stop investors from dumping its shares and bonds. Zhenro Properties stock continued to drop 81% last Friday and hit new lows in its history since January 2018. The Shanghai-based property developer shares fell as much as 66.4% the previous day, and shares in its property services unit plunged 57.7%.

Fitch Ratings on Tuesday downgraded Zhenro Properties Group Limited’s Long-Term Issuer Default Rating to ‘B’ from ‘B+’ and flagged a Rating Watch Negative. The reduction is based on Zhenro’s slow progress in addressing significant capital market maturities in 2022, as well as a material drop in contracted sales.

In its rating action commentary, Fitch said, “The capital market remains inaccessible to Zhenro, and we believe that the company may have to rely mostly on cash generation from contracted sales to repay its capital market maturities in 2022.”

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