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Hong Kong CNN –
A major Chinese real estate company has suspended payments on its offshore debt, deepening turmoil in the troubled sector.
Sino Ocean, which says it is one of the country’s 20 largest real estate developers, said in a stock exchange filing on Friday that it would temporarily halt payments and suspend trading on U.S. dollar-denominated bonds as the company undertakes a broader Taking on debt restructuring.
The company said it made this decision as it faced “increasing liquidity pressure” due to a decline in revenue across the industry since 2021, which has impacted its ability to repay its debt.
So far this year, the group has experienced “a rapid decline in contracted sales and increased uncertainty around asset disposals,” it said.
“The group respectfully requests that creditors give the group some time to resolve the current liquidity issue and work with its advisors to formulate a plan.”
Beijing-based Sino Ocean focuses on residential and commercial development and has around 600 projects in more than 80 cities in China, including high-end office buildings and shopping malls.
The developer and its financial and legal advisers, Houlihan Loukey and Sidley Austin, did not immediately respond to requests for comment on how long the restructuring process might take, whether its onshore debt payments would be affected and what the legal consequences might be.
Sino Ocean shares plunged 10.6% to just 59 Hong Kong cents (about 8 US cents) in Hong Kong on Friday following the announcement.
According to the preliminary annual report, the company’s total short-term liabilities, or debts due within a year, were nearly 60 billion yuan (about $8.4 billion) as of June.
News of its problems adds to concerns about China’s real estate sector that have come to the fore in recent weeks as Country Garden, the country’s largest homebuilder, flirted with the possibility of a default last year. Last month, the developer also halted trading of some of its bonds, citing the need to consider restructuring its debt.
On Friday, data from the National Bureau of Statistics showed that real estate investment in China fell 8.8% in the first eight months of the year compared to the same period last year. Real estate sales by living space fell 7.1% in January to August compared to the first eight months of 2022.
On Thursday, Moody’s downgraded its outlook for the entire sector, citing a decline in residential sales and ongoing concerns about the health of the industry.
In June and July, nationwide home sales fell about 20% compared to the same period last year, a report said.
This “reversed the 11.9% growth in the first five months, reflecting renewed weakness in residential real estate,” the agency added.
“Lower-tier cities, particularly in economically weak regions, will bear the brunt of the expected decline in sales as populations continue to migrate and demand declines [major] Cities will be more resilient.”
Moody’s on Thursday also downgraded the holdings of another Chinese real estate developer, China SCE Group, to junk, saying the company also had “significant” debt and cash flow problems. The group’s ratings were downgraded to Caa1 from B3.
— CNN’s Juliana Liu contributed to this report.
Source : www.cnn.com