Modern Land (China) added to a string of defaulters among Chinese property developers after it reneged on a US$250 million bond on Monday, highlighting investor concerns about the willingness to pay within the industry. The Beijing-based developer did not repay the principal or interest on the 12.85 per cent bond when it matured on October 25, according to a Hong Kong stock exchange filing on Tuesday. The firm cited unexpected liquidity issues, blaming macroeconomic and industry conditions and the Covid-19 pandemic. The decision to renege on the offshore debt came after it cancelled a repayment proposal last week. Under the plan first unveiled on October 11, Modern Land had offered to settle only 35 per cent of the face amount on October 25, while delaying the rest by three months. “The recent bond defaults have hurt confidence,” Industrial Securities said in a report dated October 23. “Given the large amount of maturities in the first quarter next year, investors in dollar bonds sold by Chinese firms expect fluctuations in the property segment to be relatively high.” While the Modern Land subject reignited concerns about widening defaults in China’s US$2.7 trillion property market amid China Evergrande Group’s distress , it also raised a few questions about Chinese developers’ willingness, rather than their ability, to repay offshore creditors. Los Angeles-based TCW Group, which manages about US$266 billion of funds globally, has trimmed its holdings in Chinese property debt, according to a Morningstar report, saying recent events have altered the team managers’ perspective on the situation and raised doubts about reliability of financial statements in the industry. “The [emerging-market debt] team members expressed concern at the recent slew of requests by Chinese real estate companies with stated large cash positions to delay payments to bondholders,” according to the Morningstar report issued on October 19. “The managers worry that recent events might be a signal that companies are being urged by the government to use cash to finish projects and pay suppliers at the expense of bondholders.” Modern Land’s decision to default came as a bit of a surprise after its chairman and controlling shareholder Zhang Lei and company president Zhang Peng both offered to loan the company 800 million yuan (US$125.4 million) “within the next two to three months”, according to a “voluntary announcement” to the stock exchange earlier this month. Contracted sales grew 52 per cent in the first six months to 21.6 billion yuan from a year earlier, according to its interim report. It received credit lines of more than 100 billion yuan from lenders during the period, citing the stability of its ratings at home and abroad. It raised US$398 million from a green-bond offering, and got a green loan of HK$100 million (US$12.9 million) from Hang Seng Bank. The group’s unrestricted cash and bank balances grew 26 per cent to 13.6 billion yuan on June 30 from December 31 last year. The company last month spent some cash to buy back bonds due in 2022 and 2023. Modern Land said it was working with its legal advisers at Sidley Austin and will engage independent financial advisers soon to help formulate a plan to resolve its debt. Modern Land did not immediately reply to several requests for comment from the Post on its financial situation. The defaulted 12.85 per cent bond was indicated at about 59 cents on the dollar on Tuesday, compared with above-par levels in July, according to Bloomberg data. The Hang Seng Properties Index of stocks in Hong Kong tumbled 1.6 per cent. “Assessing companies’ willingness to pay [not just their ability to do so] could become a much more important factor when analysing the Chinese property sector than it was in the past,” Morningstar said, citing the TCW managers. Lower property demand and tight government policies are likely to depress pricing and impact funding for homebuyers and developers, they added. Property developers assessed by S&P Global Ratings face around 480 billion yuan of both onshore and offshore maturities within one year, it said in a report last month. For Evergrande, a 30-day grace period for an interest payment on a US$1 billion ends on October 29. China’s top economic planning body, the National Development and Reform Commission, has summoned top developers for a meeting in Beijing on Tuesday to discuss issues related to their dollar borrowings.