China’s real estate sector struggles worsen as markets await Evergrande deal

HONG KONG, Oct. 5 (Reuters) – As investors were in turmoil on Tuesday with the possible sale by cash-strapped China Evergrande Group of a unit stake to raise up to $ 5 billion, more and more Chinese real estate developers have faced rating downgrades over concerns about their ability to repay debt.

Evergrande (3333.HK) faces one of the country’s biggest defaults as it grapples with more than $ 300 billion in debt. The company last month failed to pay coupons on two tranches of dollar bonds.

The possible collapse of one of China’s biggest borrowers has raised concerns about contagion risks for the real estate sector in the world’s second-largest economy, as its indebted peers are hit by downgrades over looming defaults .

Chinese developer Sinic Holdings (Group) Co Ltd (2103.HK) became the latest to be downgraded by Fitch Ratings on Tuesday due to uncertainty surrounding the repayment of its $ 246 million bonds due Oct. 18.

Sinic’s long-term issuer default rating was lowered to “C” instead of “CCC”, and came after the company announced that some subsidiaries had not paid interest on the loan agreements. onshore financing, Fitch said in his report.

Sinic could not immediately be reached by Reuters for comment.

The move comes amid continued uncertainty over the fate of Evergrande, once China’s best-selling developer and now one of the country’s biggest restructuring exercises.

The company on Monday asked to stop trading its shares in Hong Kong pending the announcement of a major transaction. Evergrande Property Services Group (6666.HK), a listed spin-off last year, also requested the shutdown and said it was referring to “a possible general offer for the shares of the company”.

The state-backed Global Times said that Hopson Development (0754.HK) was the buyer of a 51% stake in the real estate sector for more than HK $ 40 billion (HK $ 5.1 billion). dollars), citing other unspecified media reports. Hopson also said it has suspended its shares, pending an announcement of a major acquisition of a Hong Kong-listed company and a possible mandatory bid.

An Evergrande spokesperson did not immediately respond to a request for comment.

Separately, the dollar-denominated bonds of Chinese homebuilder Fantasia Holdings (1777.HK) lost nearly half of their market value in a massive sell-off on Monday, after it said it had failed to perform at time the payment of the debt of 206 million dollars in the international market.

In a statement, the property developer said it would assess the potential impact of non-payment on the group’s financial conditions.

A Chinese high-yield debt index (.MERACYC), dominated by developer issuers, hit its lowest level since the 2020 pandemic withdrawal on Monday, and has lost nearly 20% since May – while U.S. indices and Comparable Europeans have recovered.

Reporting by Clare Jim; Written by Sumeet Chatterjee Edited by Shri Navaratnam

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