Shimao Group has failed to fulfill its obligations to make a principal payment on its $400m zero-coupon bond that was due on June 14, according to the Credit Derivatives Determinations Committee. This default is the latest in a string of problems for the Chinese developer. Its sales this year have tumbled by 72% so far this year and Bloomberg expects Shimao’s struggles to persist as buyers’ hold concerns over their ability to complete their projects, preferring other competitors with stronger balance sheets. Additionally, their failure to release their 2021 results raises questions about how severe the burden is from their off-balance sheet debt which will likely hinder their access to equity raising and deter creditors from further loan extensions. Coupled with their repeated repayment extensions, investors’ confidence has plunged and made it challenging for Shimao to find buyers to offload its $12bn of assets.
Shimao’s 6.125% 2024s are trading 1.87 points lower at 10.5 cents to the dollar, at a yield of 229.76%.
