Shares in China Aoyuan Group plunged 17% in Hong Kong trading on Friday, a day after the embattled property developer said creditors have demanded repayment of $651.2 million.
The demands were due to rating downgrades, and the real estate company warned shareholders it might be unable to pay up due to a liquidity crunch.
Downgrades from rating agencies such as S&P, Fitch and Moody’s over the past two months set off conditions under which certain offshore loans became immediately payable, the company said.
“Since the second-half of 2021, Chinese property developers have been subject to widespread credit rating downgrades by the rating agencies,” China Aoyuan said in a filing.
“The offshore capital markets that have funded growth and development of the sector have virtually shut down such that companies within the sector are unable to access typical financing channels for the sector and have experienced significant pressure on short-term liquidity.”
Concerns Over Repayments
The downgrades were triggered as China’s property sector reels under a liquidity crisis that has fuelled growing creditor concerns about developers’ ability to meet their near-term offshore repayment obligations.
Evergrande, once China’s top-selling developer, has been stumbling from debt deadline to deadline as it grapples with more than $300 billion in liabilities.
China Aoyuan said on Thursday there was no guarantee it would be able to fulfil its financial obligations due to the liquidity issues, and there may be “material” adverse impact on its business if it was unable to repay the loans or reach an agreement with creditors.
The company has not reached any agreements for the $651.2 million debt, and warned that non-payment may cause acceleration of other loans where more creditors can demand repayment or enforce action.
- Reuters with additional editing by George Russell
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