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Evergrande crisis leaves Chinese developers shut out of global debt markets

The sale of international bonds by Chinese developers has almost stopped as the Chinese crisis created fears of default across the country’s real estate sector and curtailed the decisive impetus for the Asian high-yield bond market.

Since Evergrande, the world’s most debt-rich real estate group, only one developer has successfully leveraged foreign bond investors. Missed Last month’s $ 83.5 million interest payments shook the global market.

Helenbergh China Holdings’ $ 102 million bond sale this month has barely addressed. Huge lack of funds Among the highly utilized property groups. High yield dollar bond issuance is down 28% from a year ago, according to Dealogic data.

Bankers and investors said the situation was likely to worsen without Beijing’s intervention.

“The market is really pessimistic,” said Senior Debt Capital Markets Bunker, a European bank. flow.

Bankers were encouraged by investors missing payments by Evergrande for months, Sudden default Last week, luxury developer Fantasia “had a huge impact on the market.”

The ICE Index, which tracks Chinese corporate issuers in the Asian high yield bond market, shows the magnitude of market transmission. Effective yields on the index soared from 10% in June to 24% this week after default concerns swirled across the developer real estate sector.

Wider index of all Asian high yield bonds with Chinese developers Among the largest borrowersIs trading at 15%, compared to 12% at the end of September.

Credit rating agency Fitch analysts estimate China’s real estate sector’s cross-border bond issuance totaling $ 232 billion at the end of September, with nearly one-third maturity by the end of next year. It is expected. They attributed the rise in funding costs of Asian high-yield bond issuers in the third quarter primarily to “continuing negative news about China’s Evergrande business and potential defaults.” ..

“International investors are probably accustomed to more aggressive interventional policies,” said senior bankers, noting the lack of strong support from Beijing in recent weeks for struggling developers. bottom. “They are looking for kung fu, but they have Tai Chi.”

Bankers and investors said issuance could return soon with China Enhanced policy support We encouraged lending to developers. Alternatively, it could have stagnated for several months, stagnating important refinancing transactions across the sector.

A Hong Kong-based portfolio manager suggested that the threat of transmission to lenders funding real estate groups would soon force policy makers to take action.

“This can last for a month, but I don’t think it will last for three or four years,” said the portfolio manager. Chinese officials said, “We want to prevent the spillover. If we suspend lending to developers long enough, it will also be a banking problem.”

Another developer, Sinic, said on Monday Less likely to pay Bonds due next week were trading at a very distressing level of about 25 cents in dollars.

Faced with $ 20 billion in dollar-denominated debt, Evergrande missed five deadlines for payments to offshore bondholders. Offshore bondholder advisors Kirkland & Ellis and Qarun late last week There is no “meaningful engagement” From the company.

What is effectively the closure of the global capital markets to Chinese developers further complicates refinancing capacity. It has been cited by rating agencies in the recent downgrades of Evergrande and its peers. S & P has suggested that Fantasia defaults are likely to cause cross-defaults on other debts.

“It may also accelerate the repayment of other debts of the company,” the rating agency wrote. “Creditors may seek early repayment due to the deteriorating credit profile of Fantasia.”

Evergrande crisis leaves Chinese developers shut out of global debt markets Source link Evergrande crisis leaves Chinese developers shut out of global debt markets

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