Sunac bonds slump after Chinese developer misses US$29.5 million coupon payment

The note was indicated at 24.460 cents on a dollar on Wednesday versus 38.639 cents a week earlier, according to prices compiled by Bloomberg

Sunac payment miss ‘not an out-of-nowhere surprise’, analyst says

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A Sunac construction site in Haiyan, Zhejiang province. Photo: Bloomberg

Published: 7:30am, 14 Apr 2022

Sunac China Holdings, the country’s fourth largest property developer, has missed a coupon payment on a dollar bond for the first time, as offshore bond maturities worth at least US$1.1 billion come due at its debt-ridden peers in China’s real estate sector during the rest of this month.

The company saw its bonds slump on Wednesday after it missed US$29.5 million in interest payment on Monday for a 7.95 per cent bond due on October 11, 2023. It is currently in a 30-day grace period, after which it will be in default.

The note was indicated at 24.460 cents on a dollar on Wednesday versus 38.639 cents a week earlier, according to prices compiled by Bloomberg. A Sunac 6.5 per cent bond due in 2026 was trading at 23.2948 cents on a dollar on Wednesday, compared with 35.3808 cents on April 6.

“Investors were already expecting that Sunac may not be able to make the coupon payment on Monday after its earlier payment extensions, so it’s not an out-of-nowhere surprise,” said Kenny Chung, portfolio manager at Astera Capital. The prices of Chinese developers’ bonds were under pressure to rise further after a recent rebound, he added.

Sunac’s first ever failure to make a dollar bond payment comes as its peers face at least US$1.1 billion in offshore bond maturities during the rest of April. China’s beleaguered property developers are once again being tested by piling debt, as lockdowns in cities such as Shanghai hurt home sales in an already sluggish market.

At least four developers had bond payments due on Wednesday itself. Zhenro Properties had a US$21.75 million bond due and Agile Group was facing a US$14.6 million coupon payment. Redco Development had interest and principal for its US$12 million note come due. Powerlong Real Estate Holdings, meanwhile, paid the coupon and principal for its US$190 million note due on Wednesday nine days early to boost investor confidence.

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