Chinese developer Shimao Group is looking for ABS extensions; stocks, bonds sell

SHANGHAI / HONG KONG: Chinese developer Shimao Group Holdings’ default on a fiat loan payment and efforts to delay payments on asset-backed securities caused its stocks and bonds to fall on Friday, underscoring continued tension in the Chinese real estate sector.

The Shimao group’s unit, Shanghai Shimao Construction, has offered maturity extensions for two asset-backed securities (ABS) maturing this month for a total amount of 1.17 billion yuan (183.50 million dollars), three sources familiar with the matter told Reuters.

The proposals would see the company repay 10% of the principal in January, 5% each month from February to November and the remaining 40% in December, the three sources said.

One of the sources said the company and holders of ABS are currently in negotiations, but the proposals are unlikely to be approved by holders without a credit boost.

“If the negotiations fail, it will trigger cross-default clauses involving other obligations,” the source said.

Shimao declined to comment.

News of attempts to delay ABS maturities, first reported by financial information provider REDD, comes a day after a trust company, China Credit Trust Co, said Shimao defaulted on a loan after missing a payment of 645 million yuan ($ 101.10 million).

Shanghai Shimao Construction said in a filing Friday that it was in talks with China Credit Trust to resolve the overdue payment, and that the missed payment would not speed up payment requests in the open bond market.

The Shimao Group’s Hong Kong shares plunged more than 18% shortly after trading began on Friday amid investor concerns over the company’s liquidity stress. They were down more than 7 percent at.

Shanghai exchange-traded bonds issued by its Shanghai Shimao Co unit fell more than 20%, triggering trading pauses in what the Shanghai Stock Exchange called “abnormal swings.”

Three other Shanghai Shimao bonds fell 13% to 14% on Friday morning, according to exchange data. All six bonds were listed at distressed levels of 40 to 60% of their face value.

(US $ 1 = 6.3760 yuan)

(Reporting by Steven Bian and Andrew Galbraith in Shanghai, Clare Jim in Hong Kong; Editing by Edwina Gibbs and Jacqueline Wong)

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