Fitch Ratings relegated the Chinese developer Modern Land to restricted default from C on Tuesday after the company missed its payment.
Modern Land is the latest real estate builder to default adding to the record for offshore bonds from the Chinese borrowers.
Modern Land China Co. is based in Beijing and uses green technologies to build energy-saving homes. As per a filing on Tuesday, the developer failed to repay either the principal or interest on a $250 million bond which was due Monday. The fling added that the company is seeking its legal counsel Sidley Austin and expects to work with independent financial advisers soon.
According to the Chinese financial platform Cailian, the developer tried divestitures, borrowing, and adding strategic investors before it failed to make the payment. Earlier last week, it terminated a proposal to extend the bond’s maturity by three months.
Chinese borrowers have defaulted on around $9 billion of offshore bonds in 2021, with the real estate industry making for one-third of that amount. This has occurred as authorities clamp down on excessive leverage in the real estate sector in the wake of a crisis at China Evergrande Group that has worried investors all around the world.
Multiple developers have defaulted this month, Even though Evergrande made a coupon payment last week ahead of the expiration of a grace period, a number of developers defaulted this month.
Evergrande’s creditors are still preparing themselves for a major debt restructuring that could rank among the largest ever in China.
Policymakers are working on keeping these issues from snowballing. According to sources, Chinese authorities told billionaire Hui Ka Yan to use his personal wealth to lessen Evergrande’s deepening debt crisis.
Credit-rating downgrades of China-based developers have increased even more in October, hitting a record high for the second consecutive month. As per Bloomberg data, as of Oct 21, there had been a total of 44 cuts in the sector by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings following 34 downgrades for all of September.
Ratings reductions soared during the third quarter as Evergrande Group’s troubles triggered broader debt-related worries. Partner with Chinese bond firm BG Capital Management Ltd Ma Dong said that ongoing downgrades, occurring as developers face heavy operational and refinancing pressure, “will worsen their capability of raising funds”.
Also hindering capital-raising is the surge in yields on Chinese junk-rated debt, recently reaching their highest in a decade at 20% and resulting in the country’s developers making up nearly half the world’s distressed dollar bonds. Still, a media representative for Ronshine China Holdings Ltd. said that the developer made payments worth $30.2 million of interest due Monday on a dollar bond. Peer Agile Group Holdings Ltd. said it has enough funds to meet upcoming debt maturities.