(Bloomberg) -- Bargain hunters looking to time the bottom in Chinese junk bonds are having to contend with fresh signs of stress in the country’s embattled property sector.
Chinese junk bonds fell as much as 1 cent on the dollar Wednesday, extending Tuesday’s decline. REDD reported Kaisa Group Holdings plans to propose an 18-month extension on its $400 million dollar note maturing Dec. 7. The firm, which has missed initial deadlines for two coupon payments, has a further $2.8 billion of dollar debt maturing next year.
While investor sentiment toward the property sector has turned more upbeat in recent days amid signs the government will take steps to ease a historic liquidity squeeze, the nation’s developers continue to face pressure as debt repayments loom. Citigroup Inc. estimates the country’s most stressed developers will have $5.2 billion due in January, while junk dollar bond yields above 19% effectively prevent them from refinancing via the offshore primary market.
Kaisa did not immediately respond to a request for comment. The company’s hefty obligations mean a possible failure could have broader impact for the sector -- even for global investors exposed to higher-quality firms. The company is the third-largest dollar bond borrower among developers.
Kaisa’s dollar bonds were largely unchanged Wednesday late afternoon in Hong Kong. Its note due 2022 is indicated at 38.2 cents on the dollar, Bloomberg-compiled prices show. Its shares have been suspended for more than two weeks.
Concern about the sector was reignited Tuesday following a report by REDD that China Aoyuan Group missed payment on a loan product. The borrower, whose credit rating was slashed three notches deeper into junk by Moody’s earlier this week, denied the report, saying it was related to a financial dispute. Its dollar bond due 2023 is indicated at 28.9 cents on the dollar, after it fell 5.1 cents Tuesday, Bloomberg-compiled prices show.
Aoyuan, China’s 29th-largest developer by sales, needs to repay or refinance $938 million in dollar bonds next year, including a $188 million note maturing Jan. 20.
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