Our reporter Wang Lixin
This winter, housing prices are a bit cold.
Recently, following in the footsteps of Fantasia, Sony Holdings, Evergrande, etc., another real estate company, Contemporary Real Estate, has entered the camp of debt default.
On October 26, Modern Land announced that a 12.85% interest rate US dollar bill due on October 25, 2021, the repayment arrangement of principal and interest payable could not be reached on the same day.
According to incomplete statistics from the Securities Daily, this is the ninth real estate company that has defaulted on debt during the year, and its related influence is also expanding.
Since October this year, the dollar bond prices of many real estate companies, including Greenland, Sunshine City, Hongyang, Kaisa, and Zhongliang, have fallen sharply, highlighting the lack of investor confidence.
It is not difficult to see that 2021 will be the first peak of repayment of overseas debt, and the difficulty lies in the fourth quarter.
According to incomplete statistics from publicly available data, by the end of the year, there were 19 overseas debts waiting to be paid by mainland property stocks.
However, even after passing this level, greater pressure is still to come.
The real debt repayment peak is coming in 2022. If real estate companies do not arrange early, the difficulty of "passing through the barriers" will be doubled.
Difficult to "pass through the barriers" next year
As a member of a capital-intensive industry, real estate companies have diversified financing channels, mainly including domestic bond financing, bank loans, non-standard financing and overseas bond financing.
However, due to many restrictions, overseas bonds with looser capital use have become a standard financing channel for real estate companies in recent years. In particular, Chinese property stocks listed in Hong Kong, China, have gradually increased their proportion of overseas financing, which has become an important driving force for scale expansion. One of the motivations.
According to the monitoring data of the Tongce Research Institute, from the perspective of the maturity of overseas bonds of more than 80 Chinese real estate stocks, the peak period of redemption will be from 2021 to 2025. The maturity balances are respectively 1.494 billion US dollars, 27.325 billion US dollars, 18.28 billion US dollars, and 190.32 billion US dollars. Billion US dollars and 17.994 billion US dollars.
Therefore, in the next five years, real estate companies will face enormous pressure to repay US dollar debt, especially in 2022, the year when the pressure is greatest. After all, US$27.325 billion is equivalent to approximately 175 billion yuan.
"Next year is the peak period for debt repayment. If the market conditions remain unchanged, the risk of debt default is greater, and there may be more real estate companies defaulting." Huisheng International Capital President Huang Lichong said to a reporter from the Securities Daily.
"Not only mainland real estate stocks, but other real estate companies are also under redemption pressure." Another industry insider told the Securities Daily reporter that since 2020, the global spread of the new crown pneumonia epidemic, the turmoil in the US dollar bond market, and the introduction of the "three red lines" have been multiple factors. Since May of this year, including some leading real estate companies, there have been debt default problems one after another, which has gradually aroused credit concerns about the fundamentals of the industry.
As a result, the old method of dealing with debts due by "borrowing the new to repay the old" is no longer so effective.
Judging from the issuance of overseas bonds by real estate companies in recent months, there has been no increase compared to the same period last year.
According to the monitoring data of the Tongce Research Institute, from July to September 2021, the scale of overseas bond issuance by Chinese property stocks was US$6.082 billion, a year-on-year decrease of 38%; 3 issues were issued from October 1 to 28, 2021, with a total issuance scale of 647 million U.S. dollars, 12 issues will be issued from October 1 to 30, 2020, with an issue size of 3.793 billion U.S. dollars, a significant reduction in scale.
"Affected by the overseas debt default events of Evergrande, Fantasia, etc., recent international rating agencies have intensively downgraded the credit ratings of Chinese real estate companies. High-quality real estate companies are still able to issue overseas debt normally, and some have relatively strong price performance in the secondary market. The difficulty of issuing new bonds is relatively small for the main issuers of old bonds.” Huang Lichong told reporters, but affected by the overall market fundamentals, it is very difficult for most Chinese real estate companies to issue new bonds.
How to ease the dilemma
Regulators have noticed this phenomenon.
On October 26, the Foreign Investment Department of the National Development and Reform Commission and the Capital Department of the State Administration of Foreign Exchange held a symposium on foreign debt for some key industries, requiring companies to continuously optimize their foreign debt structure, use foreign debt to raise funds in strict accordance with approved uses, consciously abide by financial discipline and market rules, and take the initiative to do a good job. Preparations for the payment of principal and interest of overseas bonds will jointly maintain the corporate reputation and the overall order of the market.
This is considered in the industry as an attempt by regulators to solve the dollar debt problem.
Liu Shui, head of research in the Corporate Business Department of the China Index Research Institute, said that relevant departments have stated that they will continue to meet the company's reasonable and compliant foreign debt replacement and repayment needs in terms of foreign debt filing and registration, and capital outbound.
This may mean that under reasonable compliance conditions, when real estate companies use domestic funds to repay foreign debts, the approval speed will be accelerated.
But from the current point of view, real estate companies that have defaulted on their debts need to help themselves as soon as possible, and real estate companies whose overseas debts are about to expire should make arrangements in advance, otherwise it will have a negative impact on the sales side of the company, which will be a chain reaction.
In fact, real estate companies have indeed begun to act.
According to incomplete statistics from Crane, since the second half of 2021, 18 real estate companies have successively implemented overseas bond repurchases, with more than 100 repurchases.
However, in terms of the amount of redemption, the cumulative amount of funds involved in the cumulative repurchase of overseas bonds and bills by real estate companies was US$1.56 billion, which only accounted for 4.07% of the initial issuance amount.
"Repurchase is mainly to show confidence to the outside world. If the current market environment does not change, more real estate companies may default on debt in the future, especially in the year of peak payment in 2022." Xiao Yunxiang, senior analyst at Tongce Research Institute Said to the "Securities Daily" reporter that under the current circumstances, real estate companies with greater repayment pressure should increase their efforts to sell, reduce investment, and increase the scale of cash withdrawal as much as possible. If the cash is sufficient, it can be repaid in advance to avoid concentration of account periods. Cause a run phenomenon.
At the same time, if it is not possible to redeem on time, you can apply for an opportunity to renew or redeem off-site.
In this regard, Crane also believes that under the circumstance of overall debt reduction in the industry and continuous advancement of regulatory policies, real estate companies should deploy bond repayment plans in advance to ensure the orderly rolling of refinancing demand in the overseas bond market and stabilize corporate operations.
(Securities Daily)