Troubled Chinese Property Sector Faces Mounting Debt Defaults

 

Troubled Chinese Property Sector Faces Mounting Debt Defaults

China's Property Sector Faces Growing Debt Default Crisis

HONG KONG, Oct 20 (Reuters) - China's property sector is bracing for a surge in debt defaults as troubled developers grapple with a bleak outlook for home sales and fundraising difficulties, according to credit analysts.

As of now, an astonishing $124.5 billion worth of bonds have defaulted in the $175 billion China property dollar bond sector. Research firm CreditSights has calculated this figure, with the country's once-largest private developer, Country Garden (2007.HK), being categorized as defaulted due to the cross-default clause.

In the month of October alone, there is a total of $60.5 billion worth of Chinese property bonds scheduled for the next six months, with offshore bonds accounting for at least one-third of this total, according to data from Dealogic.

Country Garden's international bondholders are urgently seeking talks with the company.

Other companies are also showing signs of strain. State-backed Sino-Ocean Group (3377.HK) has called for a bondholder meeting to propose extending the grace period for bond interest repayment. The company cited operational difficulties as the reason for the delay, while also expressing a readiness to formulate a reasonable debt repayment plan if needed.

Gemdale (600383.SS), another major developer, has seen its bonds decline since the resignation of its chairman, sparking concerns about its financial stability.

Dalian Wanda Group is in negotiations to avoid repaying approximately 30 billion yuan ($4.11 billion) if it fails to complete an initial public offering (IPO) plan this year, according to a report by Bloomberg News.

"For property developers who have yet to default on debts, the outlook remains bleak, as we haven't seen a turnaround in the industry with sales numbers remaining weak," warned Ting Meng, a credit analyst at ANZ Bank China.

In addition to the weak cash flow from home sales, fundraising for developers, especially private ones, remains a challenge.

"Developers who are in most need of financing struggle to find qualified assets, primarily shopping malls or office buildings, as pledges to issue guaranteed bonds," explained Ricky Tsang, an analyst with S&P Global Ratings.

China's new home prices fell for the third consecutive month in September, according to official data, dashing hopes of a demand resurgence during a traditionally peak home buying period despite efforts to revive the crisis-hit property sector.

In summary, China's property market is facing an escalating debt default crisis, with troubled developers struggling due to weak home sales and funding challenges. Bond defaults and concerns over the financial stability of major developers are contributing to a bleak outlook for the country's housing market.