A key Hong Kong Stock Exchange index removed six Chinese property developers, including Evergrande’s property management unit, that either sought debt payment extensions or defaulted and failed to release 2021 financial results.
Evergrande, Sunac, Kaisa Group, China Aoyuan and Shimao Group were dropped last week from the Hang Seng Composite Index, according to Chinese business news outlet Caixin Global. The index, which measures 95 percent of the value of all companies listed in Hong Kong, took the move after their shares had been suspended from trading.
Chinese developers have struggled since 2020, when regulators rolled out deleveraging measures. Shimao, one of China’s largest developers, recently defaulted on a $1 billion bond payment after failing to pay interest and principal.
About 60 Chinese developers have more than $13 billion in debt coming due before the end of the year, according to data from Dealogic. The distressed firms are expected to ask for extensions on this debt, though investors are becoming hesitant to refinance or pour more money into the property market.
“Banks will continue to be selective about financing developers through loans, bonds and asset management products, while investors will likely remain cautious about investing in developers,” Moody’s said in a report cited by Caixin.
None of the six have projects in the U.S., where Chinese developers have faced financial woes in recent months. Oceanwide, once an owner of properties and land coast-to-coast, recently lost control of its Manhattan development site after failing to pay back $165 million of a $175 million loan from Midtown-based DW Partners. The company had planned to build a 1,500-foot skyscraper on the land.
The Chinese parent company of Pacific Park co-developer Greenland USA was downgraded last month by S&P Global Ratings, which said it was at risk of defaulting on its debt payments.
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– Isabella Farr