Chinese developer Modern Land defaults; property shares drop

  • Modern Land cites liquidity issues for non-payment
  • NDRC to meet with property firms on Tuesday
  • Hang Seng mainland property index falls more than 5%

Modern Land has missed a bond payment, the latest Chinese property developer to do so, adding to worries about wider effects of the debt crisis at behemoth China Evergrande Group and dragging on shares in the sector.

China’s state planner is set to meet with property firms carrying large dollar-denominated debts later in the day to take stock of their total issuance volume and repayment capability, amid the mounting concerns about liquidity.

Modern Land (China) Co Ltd said in a filing on Tuesday that it had not repaid principal and interest on its 12.85% senior notes that matured Monday due to “unexpected liquidity issues”.

Developers are defaulting “one by one”, said an investor with exposure to Chinese high-yield debt, who asked not to be named as he was not authorised to speak with media.

“The question is always, who’s next?”

Earlier this month, Fantasia Holdings Group defaulted on a maturing dollar bond that heightened concerns in international debt markets, already roiled by worries over whether Evergrande would meet its obligations.

Evergrande, which narrowly averted a costly default last week, is reeling under more than $300 million in liabilities and has a major payment deadline on Friday.

Shares of property developers extended losses, hurt also by concerns over China’s plans to introduce a real estate tax.

China’s CSI 300 Real Estate Index fell 2.7%, and the Hang Seng Mainland Properties Index dropped nearly 5.1%. The broader Hang Seng index edged down 0.6% while China’s CSI300 index slipped 0.3%.

The prospect of contagion and more defaults have weighed on the sector in a major setback for investors.

Chinese Estates Holdings Ltd said it would book a loss of HK$288.37 million ($2.24 billion) in the current fiscal year from its latest sale of bonds issued by Chinese property developer Kaisa Group Holdings Ltd.

Modern Land’s 11.8% February 2022 bond was down 1.6% at a discount of over 80% from its face value, yielding about 1,183%, according to data provider Duration Finance.

China Evergrande shares fell as much as 7.1%. Shares in its electric vehicle (EV) unit fell 5.5% after earlier rising as much as 5.8% as the developer said it would prioritise the growth of its EV business.

($1 = 0.1287 Hong Kong dollars)

Authors: Donny Kwok, Andrew Galbraith, Reuters

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