Shares and international bonds of Zhenro Properties slumped further on Monday after it said existing internal resources may be insufficient to repay debt due in March.
The comment was contrary to a previous commitment to redeem a $200 million perpetual bond due on March 5 and raises fresh concerns over liquidity at the Shanghai-based developer and among its peers.
Zhenro’s Hong Kong-listed shares plunged more than 13% to a record low HK$0.75 versus a 1.1% drop for the Hang Seng Mainland Properties Index.
Its dollar bond due on August 3 traded at 15.871 cents on the dollar, compared with 20.345 on Friday.
Zhenro said in a filing late on Friday that its internal funds available for debt servicing have become increasingly limited since the announcement it made on January 4 about the redemption, citing adverse market conditions.
Zhenro, China’s 30th-biggest property developer by sales, added that it is asking holders of the perpetual bond to waive claims against the company if it defaults and is offering to pay $17.50 per $1,000 principal amount if bondholders consent.
Fitch downgraded Zhenro’s long-term issuer default rating to C from B after the consent solicitation, which it views as a distressed debt exchange. If it is approved, Fitch said it will make a further downgrade to “restricted default”.
Fellow ratings agency Moody’s also lowered Zhenro’s rating to Caa2 from B3, reflecting heightened default risk.
“Zhenro had provided inconsistent debt repayment plans to the market over the past two months, which raises concerns over the company’s financial strategy and risk management,” Moody’s said in a statement.
Zhenro has another $50 million dollar bond due March 6, Refinitiv data shows, while the amount of total international bonds outstanding is $3.65 billion.
The firm’s onshore September 2024 exchange-traded bond, however, jumped more than 22% at the market open on Monday, triggering an automatic suspension, though only one trade was recorded.
Zhenro’s shares and bonds first took a hit on February 11 amid reports that it had plans to restructure its dollar bonds. The firm issued a statement on February 14 calling the reports “untrue and fictitious” and reserving the right to pursue legal action.
“Zhenro’s proposal is highly disappointing and akin to a distressed restructuring, as it gives perpetual holders lower compensation compared to the original terms,” said Leonard Law, a senior credit analyst at Lucror Analytics.
• Reuters with additional editing by Jim Pollard
This report was updated with further information on February 21, 2022.