Tahoe Group misses another bond repayment as liquidity crunch worries creditors and homebuyers

Sales of Tahoe Group plunged by 44 per cent in the first half of 2020 amid coronavirus outbreak

Buyers of the company’s housing projects have staged protests in recent months amid construction delays

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Tahoe Square in Fuzhou, the headquarters of Tahoe Group in the southeastern Chinese province of Fujian. Photo: Handout

Published: 3:30pm, 7 Jul 2020Updated: 10:54pm, 7 Jul 2020

Chinese luxury villa developer Tahoe Group failed to repay investors of a domestic bond, in a sign of increasing financial strain on the mainland’s aggressive home builders as the coronavirus pandemic exacerbated a liquidity crunch.

The Shenzhen-listed company was unable to make payment for bond principal and interest worth 1.6 billion yuan (US$228 million) due on Monday “despite efforts to raise funds in many ways”, Tahoe Group said in a stock exchange filing on Tuesday. The bond, with a face value of 1.5 billion yuan, was sold in July 2017 with an annual coupon of 7.5 per cent.

“Due to the impact of an overall downward-trending property sector and the coronavirus pandemic, the company’s inventory sell-through rate has fallen, and the sales prospect has worsened,” the Fujian-based developer said.

While most of China’s real estate sector has gradually recovered from the shock of the Covid-19 outbreak, some of the highly-leveraged players in and outside the industry are still struggling to restore their cash flow. The world’s second-largest bond market saw a 40 per cent jump in missed corporate bond repayments totalling 64 billion yuan this year through May, according to Wind Information.

Tahoe Group is facing a liquidity squeeze caused by a large amount of debt at high financing cost, with the debt load maturing in a concentrated period of time, it said. It has borrowed massively from investment trust companies and had 23.6 billion yuan in debt past due as of June 12, it said in the stock exchange filing.

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