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Shimao’s dollar bonds have dropped sharply to unprecedented levels as the market’s confidence towards Chinese real estate developers wanes.
On Friday, several of Shimao’s dollar bonds were quoted at less than 40 cents on the dollar, raising concerns on whether or not creditors will be repaid.
Shimao’s shares tumbled 18% in Hong Kong in early Friday trading to the lowest since March 2009. The developer’s 4.65% bond due January 15 fell 13%, on pace for its biggest decline in more than three weeks.
Shimao had held investment-grade status with two of the world’s big credit-rating agencies until November. Chairman and founder Hui Wing Mau, owns a 64% stake in the company since it went public in 2006.
Wall Street Journal reported that concerns about Shimao’s financial health were partly aggravated this week by news about missed payments on trust loans, a form of shadow financing in China popular with the country’s property companies.
The business’ subsidiary dispelled the rumors through a stock exchange filing, stating that it faces liquidity pressure and will take steps to quicken asset sales. It said that it hasn’t suffered any public-market debt default.
It said it owed a trust lender about 645 million yuan, the equivalent of about $101 million. The subsidiary said most of that sum is due in March, but about $24 million was due on December 27 and hasn’t yet been paid.
Government curbs on borrowing and declining home sales have crippled China’s real estate market. The industry’s biggest offshore borrowers, Kaisa Group Holdings Ltd. and China Evergrande Group are set for parallel debt workouts.