More China developers expected to default despite property market recovery
Weak players forecast to follow Kaisa amid signs of improvement in mainland property market
A few mainland developers are expected to follow in the footsteps of Kaisa Group Holdings and default on their offshore debts in the next 12 months, analysts say, despite strong recent surges in their share prices on signs of a turnaround in the property market.
High on the list is Glorious Property Holdings, with US$300 million of 13 per cent senior notes due on October 25. Other weak players, such as Hopson Development Holdings and China SCE Property Holdings, have offshore debts due early next year.
"The key is to look at their access to funding channels," said Matthew Kong at global ratings agency Standard & Poor's. "It is good news that regulators have removed refinancing restrictions to widen options for developers.
"But only those big names with strong sales performance will be able to issue onshore bonds as investors are turning more sophisticated after a few recent defaults."
S&P cut its rating for Glorious Property to CCC-minus with a negative outlook last month on weakening sales and a depleting cash balance. Moody's Investors Service flagged similar concerns.
Glorious Property said on Monday its controlling shareholder was actively pursuing financial institutions to obtain approval of finance for the implementation of a possible privatisation, after a failed attempt last year.