SHANGHAI (Reuters) – Stocks and bonds of Chinese real estate developers stumbled on Tuesday as concerns over the spread of financial contagion worsened following a debt swap by one of the top 20 home builders of the country that sparked a wave of credit warnings.
Yango Group Co Ltd on Monday offered to swap US dollar bonds for new notes personally guaranteed by its chairman to avoid future debt default.
Fitch Ratings said on Tuesday it viewed the offer as a distressed debt swap, lowering Yango’s rating to “C” from “B-“. Moody’s Investors Service previously downgraded the Yango family of companies to Caa2 from B2, citing liquidity risk.
âYango may not be able to mobilize all of its cash to repay its maturing debts, as most of it resides in its project companies. In addition, Yango’s exposure to its joint ventures is significant, which could limit its ability to control its cash flow, âMoody’s said in a statement.
China Chengxin International, a national agency, said it had placed the company on a watch list for possible downgrades, while Dagong Global Credit Rating Co lowered its outlook for Yango to negative on Monday due to fund uncertainty. for debt repayment.
The Yango Group did not immediately respond to requests for comment from Reuters.
Downgrades and warnings weighed on market sentiment on Tuesday, pushing the Hong Kong mainland property sub-index down more than 4%, taking losses from a peak on Oct. 22 – when the China group Evergrande narrowly avoided a $ 19 billion default – by almost 17%.
The CSI300 real estate index of A shares fell more than 3%, while Yango’s own shares fell 9%.
Yango Group bonds fell sharply for a second day, with Duration Finance citing its 12% March 2024 bond down nearly 58% on the day to less than 13 cents, yielding nearly 160%. Its bond traded in Shenzhen in April 2024 fell more than 15%.
November 2022 and 2023 bonds issued by Evergrande’s unit, Scenery Journey, fell more than 12% to around 20% of face value ahead of coupon payments totaling $ 82.5 million this weekend .
Bonds issued by developers Yuzhou Group Holdings Co, Ronshine China Holdings and Zhenro Properties Group also fell more than 10%.
Evergrande narrowly avoided a catastrophic default for the second time in a week on Friday, making a last-minute payment on an overdue dollar bond coupon. On Tuesday, its shares gave up their early gains to fall 2.5%.
The Evergrande woes have caused collateral damage to China’s real estate industry, with some Chinese developers forced into formal default on their dollar bonds last month and others offering extended payment schedules.
Reporting by Andrew Galbraith; Editing by Stephen Coates