Evergrande fallout: Modern Land defaults on US$250 million bond as some investors question Chinese developers’ willingness to pay

Name: Evergrande debt crisis: How likely is it that bondholders can recoup their investments?
Uploaded: 2021-10-26T07:36:48.000Z
Duration: 8 min 8 s
Description: Evergrande debt crisis: How likely is it that bondholders can recoup their investments?

Chinese developer cites liquidity issues for defaulting on a US$250 million bond, after scrapping a repayment proposal last week

Default risk mounts for Chinese developers as a 30-day grace period ends this week for Evergrande on interest payment for a US$1 billion bond

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Modern Land (China) default underscores growing distress among Chinese property developers while investors brace for a debt restructuring at Evergrande. Photo: EPA-EFE

Iris Ouyang

Published: 3:36pm, 26 Oct 2021Updated: 10:48pm, 26 Oct 2021

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.”

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Evergrande debt crisis: How likely is it that bondholders can recoup their investments?

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.