Broken plan, Chinese real estate company collects its own money to pay bonds

Breaking the plan, the Chinese real estate company “configured” its own money to pay the bonds

A member of Shimao Group (China) will use its own capital to pay off bonds maturing within the next three months, and negotiate to sell some commercial and hotel properties.

Behind the Pudong financial district of the city. Shanghai, China. File photo: Reuters.

Shanghai Shimao, the Shimao Group’s flagship real estate agency, has just announced that it will find it difficult to meet its target of 38 billion yuan ($5.96 billion) in full-year 2021 sales, due to the results. only 11 months to reach 28.2 billion yuan.

Coupon of Shanghai Shimao prices have deepened this month, raising concerns that many of the company’s assets will be sold off and transactions will be flattened along with the risk of a credit downgrade due to increased financial risks. Shanghai Shimao shares today, December 29, fell 1.20% and closed at 3.28 points.

Shanghai Shimao earlier said it had sold its wealth management business to sister company Shimao Services for 1.7 billion yuan ($267 million), a price some analysts say. is higher than the market average.

Shanghai Shimao said that the proceeds from the sale to Shimao Services will be used to develop and operate the commercial complex, not for debt repayment purposes.

Shimao Services said in an announcement late last week that it is operating stably and will not conduct any major asset sales or liquidation with parent company Shimao Group for the next six months.

Last month, Shimao Group informed investors that its revenue in 2021 will only reach about 290 billion yuan due to the tight credit situation in China. The group will also consider selling commercial properties and hotels if the price is right.

The difficulty of Shanghai Shimao is also the general difficulty of the Chinese real estate industry. Many real estate developers in this country are flooded debt and struggling to pay off the debts that are about to come due. Although the “debt bomb” of real estate Evergrande (estimated debt is more than 300 billion USD) “exploded” earlier this month did not immediately trigger the widespread crisis, but the amount of debt that the real estate industry has to pay off. will increase in the coming months.

According to estimates by financial experts at Nomura, the total value of maturing bonds (including yuan-denominated bonds) of Chinese real estate enterprises will amount to 191 billion yuan (equivalent to 191 billion yuan). equivalent to 29.84 billion USD) in the fourth quarter of 2021, then increased to 210 billion yuan in the first quarter of 2022 and reached 209 billion yuan in the following quarter. Particularly, bonds issued in USD with maturity will reach USD 19.8 billion in the first quarter of 2022 and USD 18.5 billion in the second quarter.

“However, given the pressure to depreciate the yuan and the high cost of overseas investment amid rising credit indebtedness, we believe repayment pressure on property developers (China’s – BTV) on the foreign bond market could be even higher,” said Nomura analysts.

In addition to the pressure to pay bonds due, workers’ wages are also a burden on Chinese real estate enterprises when the deadline to pay back salaries of construction workers is approaching.

Nomura’s unofficial survey results show that wages owed by Chinese real estate firms account for about two-thirds of workers’ annual wages. It is estimated that this number has reached 1.1 trillion yuan (equivalent to 172 billion USD).