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Shimao Puts All Projects On Sale as China Property Woes Deepen

Shimao, which defaulted on a trust loan last week, has asked agents since late December to help seek buyers for its properties

Shanghai-based Shimao, which has defaulted on a trust loan and extended some asset-backed securities payments this month, has said it would sell properties to lower its debt. Photo: Reuters.


Cash-strapped Shimao Group has put all its projects on sale, local media reported, as Chinese property developers face mounting pressure to negotiate with creditors to ease a liquidity squeeze in the sector that threatens to push more firms into default.

Meanwhile, China Evergrande, the world’s most indebted developer, is seeking a six-month delay in the redemption and coupon payments of a 4.5 billion yuan ($157 million) bond in a meeting with bondholders. The outcome of the meeting is expected later on Monday.

The property giant – struggling to repay more than $300 billion in liabilities, including close to $20 billion of offshore bonds deemed in cross-default by ratings agencies – has left its headquarters in the city of Shenzhen and relocated to nearby Guangzhou, Chinese media outlet The Paper reported on Monday afternoon.

The Evergrande logo has been partially removed on one side of the building, which saw chaotic protests in recent weeks with investors crowded in the lobby to demand repayment of loans and financial products. Security personnel said the company had left the building last month.

China’s economic policymakers plan to make it easier for state-backed developers to buy up distressed assets of their debt-laden private peers, in a bid to avert a liquidity crisis in the sector.

But the smaller Shimao Group Holdings has moved to accelerate asset disposals by putting all its real estate projects – both residential and commercial properties – up for sale, Caixin reported on the weekend.

Shimao, which defaulted on a trust loan last week, has asked agents since late December to seek buyers for its properties, it said.

News that Shimao is discussing asset sales lifted the Group’s shares by over 19% in Hong Kong on Monday.


Preliminary Deal

The Shanghai-based property developer has struck a preliminary deal with a Chinese state-owned company to sell its Shimao International Plaza Shanghai, a commercial property on Shanghai’s Nanjing Road, for more than 10 billion yuan, the Caixin report said.

The company did not respond to a request for comment.

Daiwa said in a research report that Shimao will find itself in a vicious cycle of liquidity issues given the recent negative news, even though the firm said it is not in debt servicing default.

Shimao Group is largely focused on residential property development, with Shanghai Shimao Construction being its main China business platform, and Shanghai Shimao Co Ltd mainly developing commercial properties.

Shanghai Shimao Construction said on Friday it was in talks with China Credit Trust to resolve a $101 million defaulted loan payment. The missed trust payment would not accelerate payment requests in the open bond market, it added.

The unit has proposed extensions on maturities for two asset-backed securities (ABS) due this month totalling 1.17 billion yuan ($183.50 million).

Daiwa said: “We believe negative publicity will erode the confidence of home buyers and investors. This, in turn, would negatively impact Shimao’s future refinancing activities and contract sales prospects and lead to further deteriorating cash flows and liquidity.”

It estimates Shimao to have around 23 to 25 billion yuan in corporate bonds, ABS and trust loans due for payment in 2022, noting it has only 16.1 billion yuan in cash.


Liquidity Crisis

Chinese developers are facing an unprecedented liquidity squeeze due to years of regulatory curbs on borrowing, leading to a string of offshore debt defaults, credit-rating downgrades and sell-offs in developers’ shares and bonds.

Small developer Modern Land, which has missed payment for its 12.85% notes due on October 25, 2021, said in a filing on Monday it has received notices from certain note-holders demanding early repayment of their senior notes.

The developer said it has been in discussion with these creditors for a waiver and it has appointed financial advisers to formulate an overall plan for feasible remediation actions.

The firm is also in talks with noteholders on a restructuring plan for its $1.3 billion of offshore bonds, it added.

“It’s going to be the peak of repayment period and we’ll see more developers default,” said Kington Lin, managing director of Asset Management Department at Canfield Securities Ltd.

“The market is watching how many SOEs will get more M&A loans to help the developers in distress.” 

Modern Land shares, which have been suspended since October 21, sank nearly 40% on Monday morning to HK$0.23, a historical low.


  • Reuters with additional editing by Jim Pollard

This reported was updated with new details on January 10, 2022.




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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.


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