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China's real estate crisis is getting worse as the defaults of major Shanghai developers get worse

Hong Kong (CNN Business)Another major Chinese developer defaults and is sickThe real estate sector, the world's second-largest economy.

Shanghai-basedShimao Groupwill pay interest and principal on a $ 1 billion bond to be paid on Sunday, according to a company filed with the Hong Kong Stock Exchange. I couldn't. According to the offer documents, the bond did not have a principal grace period.
This is the first timemissed the debt repayment of a dollar bond, and Shimaohas been in financial stress for months. I've been working on the rise.

China's real estate sector has moved from one crisis to another since 2020, when Beijing began cracking down on excessive developer borrowing to curb high debt and control runaway home prices. Is lurking.

The problem was significant last fall when China's second-largest real estate developerEvergrandebegan struggling to raise cash to repay its lenders. Expanded to. The confused company isChina's most debt-ridden real estate developer, with debt of about $ 300 billion. Labeled as a defaulter byFitch Ratingsin December.
Earlier this yearMoody's estimatesshow that the Shimao Group has a large amount of debt that will mature in 2022, some of which are held by international investors. Includes $ 1.7 billion worth of bonds worth 8.9 billion yuan (8.9 billion yuan). $ 1.4 billion worth of bonds held by Chinese investors, and "significant" offshore bank loans.

Founded in 2001 by entrepreneur Hui Wing Mau, Shimao develops large-scale housing projects and hotels nationwide. It owns Shanghai Shimao International Plaza, one of the tallest skyscrapers in the center of Shanghai.

In March, the company estimated that 2021's net profit plummeted by about 62% year-on-year, primarily due to the "harsh" environment facing the real estate sector. Later, due to the blockade in Shanghai, the announcement of the 2021 results was postponed.

“The Group has experienced a significant decline in contract sales in recent months due to the significant changes in the macro environment of the Chinese real estate sector since the second half of 2021 and the impact of Covid-19. It is expected to continue in the short term until the real estate sector stabilizes. "

The company added that it is trying to reach a "friendly resolution" with creditors by failing to repay the principal of other offshore debts . Without an agreement, creditors may accelerate repayments to the company. Since the bankruptcy of

Evergrande, a series of prominent developers in the country have defaulted on, includingFantasiaand Kaisa.

Industry problems are exacerbated by Beijing's Zero-COVID policy and economic slowdown. China put many of its major cities, including Shanghai, under strict siege earlier this year, fighting an increasing number of Covid cases and severely damaging its business operations.

Beijing-basedSunac China, one of the country's largest developers, accusedof having "significantly" hurt the Covid outbreaklast month March and April sales exacerbate the liquidity crisis. At the same time, the developers admitted that it made the dollar bond the default.

On Friday, real estate research firm China Index Academy found that prices for new homes in 100 cities in the first half of this year fell by more than 40% compared to the same period last year. ..

Authorities are trying to stop the bleeding. Theystrengthened their efforts to revive home sales by lowering mortgage rates and relaxing home buying rules. Some developers have come up withimaginative ways to promote, from accepting grains and garlic as a down payment to offering pigs as an incentive for buyers.

June sales show signs of a dramatic drop from the previous month, but Beijing's continued commitment to the Zero-COVID policy makes the road to a recovery in the real estate sector "quite bumpy." It's likely, Nomura analyst said. In a memo on Monday.

Meanwhile, Evergrande is preparing a government-ledhuge debt restructuring plan. Thedeveloperwill present theproposal by the end of this month.