Chinese real estate companies propose to restructure debt and extend payment maturities

Some Chinese real estate companies have proposed to regulators extending the maturity of their overseas bonds or undertaking a debt restructuring, sources said, as a growing number of defaults shake investor confidence in the sector.

The promoters presented the proposals on Tuesday, in a meeting with the National Development and Reform Commission (NDRC) and the State Administration of Foreign Securities (SAFE), said two sources with direct knowledge of the matter who asked not to be identified. SAFE and NDRC did not respond to a request for comment from Reuters.

It was not immediately clear which firms raised the proposals and what decision regulators will make. However, the sources said that regulators asked companies – facing large overseas debt maturities – to assess their payment risks and report difficulties.

Regulators also asked companies at the meeting to proactively prepare for the repayment of principal and interest on their bonds abroad. In addition, he asked them “maintain collective reputation and market order“Said the NDRC in a statement issued Tuesday night.

The meeting highlights the efforts of indebted construction companies and regulators to contain the consequences of future defaults of the giant Evergrande China, amid growing concerns about a liquidity crisis in the sector.

Evergrande, which became the real estate agency with the highest sales volume in China, is reeling from the weight of $ 300 billion in liabilities, fueling concern about the effect of an eventual collapse of the company on the world’s second-largest economy and global markets.

Evergrande narrowly avoided a costly default last week, raising $ 83.5 million for a bond interest at the last minute, boosting confidence that the company could avoid disorganized bankruptcy.

The construction group needs to find $ 47.5 million by Friday and has nearly $ 338 million in other overseas coupon payments due in November and December.

Strong concerns about China’s real estate sector, which accounts for a quarter of its Gross Domestic Product (GDP), remain important to investors and the country’s financial authorities.

The meeting with regulators took place in Beijing on Tuesday in the context of several bond defaults in the sector. Real estate companies Fantasia Holdings Group, Sinic Holdings and Modern Land defaulted on dollar coupons due this month.

“Realtors were asked to report in great detail about all their overseas bond payment plans; they need to express if there are particular payments (for which) they are seeing some difficulties”Said one of the sources.

The S&P rating agency said Wednesday that defaults in Chinese real estate are on the rise, with about $ 84 billion in domestic and foreign bonds due in the next five quarters and more maturities in January 2022.