(Bloomberg) — Shimao Group Holdings Ltd. bonds jumped amid signs that authorities are taking steps to prevent a cash crunch at the embattled developer.
China’s financial regulator is coordinating negotiations between Shimao Group and some trust firms for loan extensions, according to people familiar with the matter. Shimao Group’s dollar bonds rose about 6 cents on Friday, poised for their biggest gain in a month, while its shares were down almost 4%.
“We think this government intervention may help alleviate market concerns on the margin, but is not an indication of a government bail-out for the sector,” Citigroup Inc. strategists including Dirk Willer wrote in a note. “We believe Shimao is a likely survivor, and we continue to see the diversified strategy behind our basket trade as an appropriate way to participate in what is admittedly a high-risk situation.”
In a sign of the challenges facing the company, Moody’s Investors Service downgraded Shimao Group deeper into junk on Friday on increased refinancing risks. The company is still rated investment grade at Fitch Ratings.
The rout in developer shares this year means the richest bosses behind China’s property firms have lost more than $46 billion combined this year, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 richest people that started in 2012. China Evergrande Group founder Hui Ka Yan’s wealth alone has plunged by $17.2 billion, one of the biggest slumps for 2021.
Key Developments:
- Evergrande Boss Leads $46 Billion Wealth Loss in Worst Year Yet
- Singapore’s $744 Billion Fund Eyes Chinese Property Assets
- China Regulators in Talks With Shimao, Trusts on Loan Extension
- Chinese Estates Halted Pending H.K. Takeover Code Announcement
- Moody’s Downgrades Greenland Holding Group to Ba3
- Shimao Group Holdings Downgraded to Ba3 by Moody’s
Shimao Downgraded to Ba3 by Moody’s (2:30 p.m. HK)
Shimao Group Holdings’s long-term rating was downgraded by Moody’s to Ba3 from Ba1. Ratings remain on watch negative.
“The rating downgrade reflects Shimao’s increased refinancing risk due to its constrained funding access and sizable debt maturities over the next 6-12 months,” said Celine Yang, an analyst at Moody’s.
Singapore Fund Eyes Chinese Property Assets (5:00 a.m. HK)
Singapore’s $744 billion sovereign wealth fund sees potential opportunities to do deals and buy debt in China’s battered real estate sector, confident Beijing won’t let things “spiral out of control” following several defaults.
“We continue to have confidence that it is a good investment market for us,” said Lim Chow-Kiat, chief executive officer of GIC Pte. “We are not moving away from being involved in the Chinese real estate market.”
Evergrande Boss Leads $46 Billion Wealth Loss (3:00 a.m. HK)
China Evergrande Group founder Hui Ka Yan was smiling as he attended the celebration of the Communist Party’s 100-year anniversary in Beijing back in July. To many, his invitation was a sign he still had the government’s backing, and that gave his company’s bonds a rare boost.
But if any investor still had hopes then that Evergrande was too big to fail, those are far gone now. The developer’s debt and shares are trading near record lows after the firm failed to honor its obligations and Fitch Ratings labeled it a defaulter.
Chinese real estate tycoons are having their worst year since at least 2012 as the government cracks down on the companies’ debt binge and President Xi Jinping aims to redistribute wealth to bring “common prosperity.”
Moody’s Downgrades Greenland to Ba3 (8:19 a.m. HK)
Moody’s said it downgraded the corporate family rating of Greenland Holding Group Co. to Ba3 from Ba2. The outlook was changed to negative from ratings under review.
“The downgrades reflect our expectation that Greenland Holding’s and Greenland Hong Kong’s property sales will fall over the next 6-12 months because of tough business and funding conditions. Weakened operations will worsen the company’s profitability and financial metrics,” said Kaven Tsang, a Moody’s senior vice president.
Regulators in Talks With Shimao on Loan Extension (7:08 p.m. HK)
China’s financial regulator is coordinating negotiations between Shimao Group Holdings Ltd. and some trust firms for loan extensions, according to people familiar with the matter.
Officials from the China Banking and Insurance Regulatory Commission helped arrange talks between Shimao and trust firms including Guotong Trust Co. and China Minsheng Trust Co., the people said, asking not to be named discussing a private matter.
Evergrande Told to Prioritize Paying Workers (5:52 p.m. HK)
China Evergrande Group is prioritizing payments to migrant workers and suppliers as regulators urge the cash-strapped developer to head off any risk of social unrest, according to people familiar with the matter.
Authorities are particularly focused on making sure payrolls are met before the Lunar New Year holidays starting Feb. 1, when thousands of migrant construction workers are due to reunite with their families, the people said, asking not to be named discussing private conversations. Evergrande had 163,119 employees as of June 30 and indirectly supports the livelihoods of many more through its vendors.
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.
