Chinese property developers are stepping up efforts to raise cash through share placements and stake sales, as they look for ways to alleviate the historical liquidity squeeze.
Surging yields in the offshore bond market have made it difficult for Chinese developers to refinance, and declining home sales have added to the gloom. Debt default woes at cash-strapped developers fuel investor concerns about the financial contagion.
Evergrande Default ‘Highly Likely’
Evergrande announced on Nov. 18 it was selling its entire stake in the streaming platform firm HengTen at HK$1.28 apiece, a discount of 24 percent to its closing price on the prior day, and raised about $273 million.
As its liquidity crisis deepened, Evergrande said that it will book a loss of $1.1 billion from the sale, according to its Hong Kong exchange filing (pdf).
However, S&P Global Ratings said in a report the same day that a default is still “highly likely” for the world’s most indebted developer, because it faces a larger test in March and April next year, with $3.5 billion in dollar bond maturities.
“The firm has lost the capacity to sell new homes, which means its main business model is effectively defunct. This makes full repayment of its debts unlikely,” said the report.
In recent weeks, the Shenzhen-based real estate firm has been struggling from deadline to deadline as it battles with more over $300 billion in liabilities, $19 billion of which are international market bonds.
