Evergrande’s unease spreads in China’s real estate bond market

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Evergrande Real Estate Group Co., Ltd. update

The bond yields of some of China’s largest real estate companies are rising, indicating that concerns about the debt problems of leading developer Evergrande are spreading more widely in the industry.

After falling more than 20% a day ago, real estate developer Guangzhou R&F’s bonds fell slightly to 60% of their face value in Shanghai on Tuesday. The move was made after rating agency Moody’s downgraded the group’s credit rating and issued a warning about its refinancing capabilities.

Another real estate developer, Fantasia Group, which is also facing refinancing problems, stated in a statement to the Hong Kong Stock Exchange yesterday evening that it had purchased US$6 million of its own bonds on several occasions, one of which was due in December. Period, and has fallen to 78 cents. On the dollar.

After the debt and equity of China Evergrande, the world’s most indebted real estate developer, was violently sold off, refinancing worries intensified. The company is experiencing a liquidity crisis. Forced it last week Warn about the risk of default.On Friday, some bonds were traded on the Shanghai and Shenzhen stock exchanges Be called off.

In addition to volatility in international market transactions as one of Asia’s largest high-yield borrowers, Chinese real estate developers are also struggling to cope with tightening credit conditions and weak domestic sales in China. Beijing introduced new regulations last year to limit its influence.

“In general, financing conditions have tightened and the offshore bond market has become more turbulent,” said Moody’s Vice President Zeng Kaiwen.

“This actually has some negative effects on the entire market,” he added. “The risk of refinancing has increased.”

The problems facing Evergrande, Anxious to dispose of assets An index by ICE and Bank of America shows that in order to raise cash and repay debt, it has helped push up the yield of the entire high-yield market in China, with the average yield rising to 13% in late August Less than 10% in June.

In language reminiscent of Evergrande’s challenges, Moody’s estimated late last week that Guangzhou R&F did not have enough cash to repay its debts for the next one and a half years, which meant it would need to rely on “new financing or asset sales.”

Fantasia Group stated in the document that its purchase of its own bonds will “reduce the company’s future financial expenses and reduce its level of financial liabilities.”

In a separate document late Friday, it stated that the bonds were also purchased through a company wholly-owned by Fantasia founder Zeng Jie, the niece of former Chinese Vice President Zeng Qinghong.

Supplementary report by Hudson Lockett in Hong Kong

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