As many as a third of China’s high-yield property developers could default in 2022 as stresses on bond maturities increase, Goldman Sachs warned in a note on Friday.
All 22 of China’s high-yield issuers either defaulted on dollar bonds or undertook bond exchanges this year to defer repayment of debts because of the property sector crisis, the bank said.
“Unlike in previous years, more issuers have conducted bond exchanges than have defaulted so far this year,” Kenneth Ho said in a note to clients, raising his default rate forecast to 31.6% from 19% previously.
“We view bond exchanges and maturity extensions as efforts that provide short-term relief on credit stresses by pushing bond maturities to a later date, but are not sufficient to resolve the credit issues.”
Raising the China property high-yield default forecast pushed up Goldman Sachs’ forecast for the default rate among high-yield Asian corporate issuers to 15.5% from 9.3% previously – not far off the record of 17.8% recorded in 2021.
A crunch in China’s key property sector emerged about a year ago, when a government bid to reduce massive debts held by companies such as China Evergrande sparked a debt market squeeze and a first wave of defaults.
• Reuters with additional editing by Jim Pollard
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