High-Yield Bonds Fall as Home Sales Slump: Evergrande Update

(Bloomberg) -- China's struggling real-estate firms had another miserable month in November as a slump in home sales deepened.

The country's builders are facing $12 billion in trust payments coming due in December, posing a major challenge for an industry whose liquidity squeeze has spooked global markets. Private-sector developers are selling the fewest bonds domestically in nearly five years, adding to the risk of additional defaults.

China high-yield dollar bonds saw declines accelerate Wednesday afternoon, falling as much as 3 cents on the dollar, according to credit traders. A gauge of real-estate stocks gained 0.1%, while China Evergrande Group declined 1.8%.  

Key Developments:

• China Private Builders' Yuan Bond Sales Hit Lowest in Five Years
• Chinese Developers Lead Declines in High-Yield Dollar Bonds
• China Home Sales Slump Deepens as Easing Shows Little Effect
• R&F's Liquidity Crunch Could Persist on Home-Sales Slump: React
• Arkkan Raises $245 Million for China Real Estate Recovery Fund
• China's Developers Face $12 Billion in Trust Payments This Month
• Kaisa Health Unit Sells Convertible Notes Maturing March 2022

Yuzhou Pledges Shenzhen Headquarters Toward 1.1b Yuan Loan: REDD (3:16 p.m. HK)

Yuzhou Group Holdings Co. pledged its Shenzhen headquarters for a 1.1 billion yuan ($173 million) bank loan in late November, REDD reported Wednesday, citing two sources briefed on the matter. It's not clear what the financing will go toward, they said according to REDD.

The loan, provided by a Chinese joint-stock commercial bank, has been fully drawn down, said REDD, citing one of the sources.

China Private Builders' Yuan Bond Sales Hit Lowest in Five Years (2:15 p.m. HK)

China's private-sector developers are selling the fewest bonds domestically in nearly five years, adding to the risk of additional defaults for the industry. 

The companies' yuan bond issuance dropped to a combined 7.72 billion yuan in October and November, the smallest two-month total since January 2017, according to Bloomberg-compiled data. That's in stark contrast to state-owned builders, which sold a record 89.1 billion yuan of local notes last month.

China Home Sales Slump Deepens (10:47 a.m. HK)

The slump in home sales deepened for real-estate companies in November. Contract sales by the country's top 100 developers plunged 38% from a year earlier to 751 billion yuan, sharper than the 32% drop in the previous month, according to preliminary data compiled by research firm China Real Estate Information Corp.

A widening debt crisis at firms including Evergrande and official efforts to rein in property speculation have combined to crush home demand and hit the world's second-largest economy, forcing authorities to ease curbs and soothe homebuyer concerns.

Arkkan Raises $245 Million for China Real Estate Recovery Fund (9:48 a.m. HK)

Arkkan Capital, a credit-focused Asian special situations fund manager, has completed the first close for a China real-estate recovery fund. The firm, founded by former Goldman Sachs banker Jason Brown, plans additional closes for Arkkan China Real Estate Fund in the first half of 2022.

China Baida Unit Sues Fantasia Over 100m Yuan Loan Repayment (8:33 a.m. HK)

Investment holding company Baida Group said one of its subsidiaries sued property developer Fantasia Holdings Group and its Hangzhou unit over the repayment of a 100 million yuan loan. A court in Hangzhou has accepted the lawsuit.

China Default Rate Improves for Another Month, Bloomberg Intelligence Says (7:30 a.m. HK)

China's issuer-based bond default rates may stay stable in December even though more negative news about real-estate issuers may spur market volatility and put more bonds in distressed territory, Bloomberg Intelligence analyst Jason Lee wrote, adding that the market may reverse from its selloff amid positive developments.

China's December default rates hinge on Evergrande and Kaisa, according to Bloomberg Intelligence. They have a combined $171 million of interest payments that are still in 30-day grace periods which end in December. But developers' recent, successful asset sales to state-owned enterprises sparked a positive reversal in the mark-to-market value of China high-yield bonds.

China's Developers Face $12 Billion in Trust Payments This Month (7:15 a.m. HK)

Chinese developers are facing $12 billion in trust payments coming due in December, posing a major challenge for the sector whose liquidity squeeze has spooked global markets.

The firms have already this year defaulted on more than $10 billion of these high-yielding, short-term products, which had been deemed to be a legitimate, safe and predictable place to park money for mainly wealthy Chinese and institutions. That comes on top of at least $10.9 billion of potential losses in other wealth products at developers, including China Evergrande Group, which has angered employees and tens of thousand people across China.

Developers are struggling to stay afloat after Beijing pushed to rein in the industry following years of breakneck growth. A deepening contagion into the $3 trillion trust industry will add pressure on policy makers to ease the crunch in order to avert a more dramatic slowdown, with the real estate industry accounting for about 15% of the economy.

A look at Evergrande's maturity schedule:

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