The China Securities Regulatory Commission (CSRC) on February 18 held a conference on bond supervision amid on-going bond default risks facing real estate developers.
According to the summary of the conference, CSRC focused on preventing and resolving the risk of bond defaults. The summary did not provide details on the Commission’s plans.
The meeting occurred as major Chinese real estate developers failed to pay their debts and rating agencies downgraded their credit ratings.
Bloomberg reported that Yango Group missed a 30-day grace period payment on a total of 27.3 million dollars in interest due on January 15.
Zhenro, a Shanghai-based developer, is soliciting the consent of creditors “to certain proposed waiver and amendments” to help improve its overall finances.
Their payment funds for debt services “became increasingly limited,” and they may not be enough to meet its upcoming debt maturities in March 2022.
On February 18, Moody’s Investors Service downgraded Zhongliang Holdings Group Company Limited’s (Zhongliang) corporate family rating to B2 from B1 due to lack of funds. The company’s outlook on the ratings remains negative.
Earlier, Fitch Ratings warned on January 27 that “China’s corporate bond default rate will be pushed up by privately owned property developer defaults in 2022.”
As property developers miss overdue loans payment, courts have frozen their assets.
According to Reuters, on February 15, a municipal court in Guangzhou froze 361.5 million yuan (57 million dollars) Evergrande assets the previous week for overdue payments.
Beijing Financial Court has frozen 50 million yuan (7.9 million dollars) of Shanghai Shimao Investment shares held by Shanghai Shimao Construction.
According to Bloomberg, as debt concerns become a severe problem, China will seek to reduce defaults in the real estate sector, and banks and state-owned enterprises will be called upon to help.
Alicia Garcia Herrero, a Chief Economist for Asia Pacific at Natixis, said in response to questions from Bloomberg that “The government will try to slow down—if not stop—the number of bond defaults this year on the developer front.”
Herrero also notes that “It needs to turn sentiment to improve land sales as local governments are suffering.”