Modern Land, based in Beijing, is the latest Chinese property developer to default on its dollar-denominated debt payments.
The principal and interest debt that Modern Land could not pay on October 25 was worth $250 million. In a statement sent to the Singapore Stock Exchange, where this bond is listed, the company said that the inability to repay the debt was due to a sudden liquidity problem due to the impact of many adverse factors such as economic macro, real estate industry environment and Covid-19.
Modern Land wants to extend the repayment period until the end of January 2022. Fitch Ratings has downgraded Modern Land’s credit rating from B to C after the business proposed to extend its debt.
The business is working with legal counsel Sidley Austin and hopes to attract financial advisors soon to get through the crisis.
The number of China’s bond defaults has set a new record, with a total value of at least $8.7 billion, of which the real estate industry accounted for a third.
Fantasia Holdings, Sinic Holdings and China Properties all defaulted on USD bonds this month, while Evergrande Group got out of trouble at the last minute after making bond interest payments late last week. However, Evergrande will face another repayment deadline this Friday (October 29).
As the liquidity crisis worsened, global rating agencies downgraded Chinese property firms’ credit scores. As of October 21, Moody’s Investors Service, S&P Global Ratings and Fitch Ratings have downgraded the ratings of Chinese real estate companies 44 times, after 34 times in the whole of September.
Ma Dong of BG Capital Management commented, Evergrande’s crisis has raised concerns not only about the real estate industry but also the whole Chinese economy. Currently, the Government of this country is also actively controlling to reduce leverage in the financial system before things get out of hand.
Besides, the downgrade of credit rating will make it more difficult for companies to raise capital while they are under great pressure to refinance.
Duc Minh (Theo Bloomberg, Nikkei Asia)