Evergrande crisis: developer Modern Land (China) seeks debt extension, to repay US$87.5 million early

Beijing-based developer seeks an extension on US$250 million bond to avoid ‘any potential payment default’
Debt extension request comes as concerns continue to swirl about a potential Evergrande default and the Chinese property sector

Banking & finance

Chad BrayandPearl Liu

Published: 5:00pm, 11 Oct 2021

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Property developer Modern Land (China) on Monday asked its debt holders for a three-month extension on a US$250 million bond set to come due later this month to avoid a potential default, as concerns continue to swirl around the embattled China Evergrande Group and the Chinese property sector’s debt levels.

The Beijing-based builder said it was seeking bondholder approval to extend the maturity of its 12.85 per cent senior notes from October 25 to January 25 and to repay US$87.5 million of the principal amount.

Modern Land said it wanted to extend the maturity period to improve its “liquidity and cash-flow management and to avoid any potential payment default”, according to a regulatory filing with the Singapore Exchange. Its senior notes are listed in Singapore.

The Hong Kong-listed company separately said that its chairman, Zhang Lei, and its president, Zhang Peng, had agreed to provide about 800 million yuan (US$124 million) in shareholder loans, with the expectation that they would be completed in two to three months.

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“Zhang Lei expressed that he would consider giving continuous support in due course, depending on the group’s financial situation. It demonstrates his continuous commitment to the group and his unwavering confidence in the group’s businesses and development,” the company said in a filing with the Hong Kong stock exchange.

Modern Land did not immediately respond to a request for further comment. The company’s shares declined by as much as 1.1 per cent in Monday’s afternoon session in Hong Kong.

The request to extend Modern Land’s debt repayment comes against the backdrop of an expected default by Evergrande, China’s biggest home builder by sales last year.

Evergrande, the world’s most indebted developer, missed interest payments on its offshore debt in September and has three more coupon payments that are due on Monday. A group of bondholders said on Friday that the company had not had a “meaningful dialogue” with them since missing last month’s payments and that they were worried about assets bleeding to other creditors.

Property developers such as Evergrande have been squeezed by Beijing’s efforts in the past year to tamp down speculative property price bubbles. In August last year, the People’s Bank of China adopted new “three red lines” requirements to measure the debt levels of developers and to limit their ability to borrow if they were overleveraged.

As Evergrande’s cash crunch has worsened, questions have risen about its ability to repay its massive debt load and how that could affect thousands of small businesses that depend on its projects.

Cracks are starting to show with other developers, as well.

Fantasia Holdings Group, the debt-laden property developer founded by the niece of a former Chinese vice-president, was downgraded to default or near default status by major credit rating agencies last week after it failed to repay US$205.7 million in remaining principal it owed on a US$500 million senior note it took out in September 2016. There was no grace period for the principal repayment.

For its part, Modern Land previously said it would seek to “continuously reduce debts” in the second half of this year.

“Efforts will be made to promote both endogenous financing and exogenous financing, and balance the share of bond financing and equity financing, in an attempt to achieve a reasonable balance between capital management and capital operation,” the company said as part of its half-year results announcement in August.

For example, the company repurchased about US$1 million of the combined principal of its 2022 and 2023 green senior notes, after it repurchased US$3 million of those notes in June and in July.

This article appeared in the South China Morning Post print edition as: Modern Land seeks extension on US$250m bond

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