Chinese property developer Sichuan Languang has joined the list of defaulted Chinese developers after it failed to repay its local CNY 900mn ($139mn) 7.5% 2021s that matured on Sunday. The default comes after the company failed to raise capital for the repayment and had cautioned its debt holders on Friday that it was unsure if it could repay the bond. The Shanghai-listed property developer and its subsidiaries have an overdue debt of ~CNY 4.54bn (US$703m) as of July 12. The company also has an upcoming bond worth CNY 1.6bn ($247.5mn) maturing on July 29 and a bond worth CNY 1.1bn ($170.2mn) with a put option on July 23. The company has been facing refinancing  troubles due to liquidity crunch since the end of 2020 and saw its President and the Chief Financial Officer announcing their resignations last week. Beijing’s move to curtail borrowings by debt-laden companies has only added to its woes. Three local credit agencies including Dagong Global Credit Rating Co., China Chengxin International Credit Rating Co and Golden Credit International Rating Co. had sounded alarm bells after they lowered the credit rating Thursday. Dagong Global Credit Rating Co. cut its rating Thursday to BBB- from A+ while China Chengxin International Credit Rating Co. downgraded them to B from A, both their second reductions of the week. The duo’s rating had each been at AA prior to the earlier downgrade.

The company also has $1.05bn of offshore bonds outstanding. The bonds were issued by its subsidiary Hejun Shenze Investment and include the following

  • $300mn 8.85% 2022s maturing on October 10, 2022 (Issued date: January 11, 2021)
  • $450mn 11% 2022s issued on June 4, 2020  (Issued date: June 4, 2020)
  • $300mn 10.4% 2023s issued on December 20, 2020 (Issued date: December 9, 2020)

The developer is exploring ways to raise funds and has hired financial adviser Admiralty Harbour Capital possibly for a dollar bond issuance which could involve a restructure of its older dollar bonds. The developer was downgraded to CCC- from B- by S&P on June 18 and to Caa3 from B3 by Moody’s on June 22. The actions followed previous downgrades on May 31 by both S&P and Moody’s.

Its offshore and onshore bonds have hit record lows. It’s 8.85% 2022s11% 2022s and 10.4% 2023s were trading at distressed levels of 29.33, 28.83 and 25.33 respectively. The latest 8.85% 2022s have lost ~70 cents on the dollar since issuance in January this year.
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