Property developer Sunac China Holdings has become the latest Chinese home seller shoved into default by China’s “three red lines” deleveraging campaign and home sales that have sputtered amid the economic disruption brought on by Covid-19 containment policies. China’s fourth-largest developer by sales last year, Sunac failed to pay US$29.5 million in interest on a US-dollar bond before a Wednesday deadline and does not expect to make payments on three additional notes, it said in a filing with the Hong Kong stock exchange Thursday morning. The filing concerns a US$741.6 million bond with a coupon of 7.95 per cent, which will mature on October 11, 2023. The interest payment originally came due on April 11, but Sunac was given a 30-day grace period that ended on Wednesday. The company added in its filing that it has not paid interest on another three senior-note US-dollar bonds: a US$643 million bond with a coupon of 8.35 per cent maturing in April 2023, a US$942 million bond with a coupon of 5.95 per cent maturing in April 2024, and a US$400 million bond with a coupon of 6.8 per cent maturing in October 2024. Like Zhongliang Holdings, which on Tuesday extended a deadline for creditors to accept an exchange offer on two of its US dollar-denominated bonds , Sunac is currently tagged as yellow under the red lines system, meaning it is unable to take out new loans worth more than 10 per cent of its current debts. “The company does not expect that it will make payments under the above-mentioned notes and other senior notes issued by it when they become due or within the relevant grace periods,” Sun Hongbin, Sunac’s chairman and founder, wrote in the filing. One of the country’s top developers, with a strong presence in major cities such as Beijing, Shanghai and Shenzhen, Sunac sold only 13.6 billion yuan (US$2.02 billion) worth of homes in April. This represents a 75 per cent drop compared with a year ago and a 40 per cent drop compared with the 22.8 billion yuan sold in March. “Contracted sales in the key first-tier and second-tier cities, which form part of the Group’s key layout, have been significantly affected by the Covid-19 outbreak since March 2022, … which further exacerbated the current liquidity constraints of the Group,” Sunac said in its filing. China introduced the red lines regime on highly indebted developers in August 2020 to stem systemic risk, shutting many of them out of the funding market. The rules limit borrowing by defining thresholds on liability-to-asset ratio at 70 per cent, net debt-to-equity ratio of 100 per cent, and a cash-to-short-term debt multiple of more than one time. Failure to meet these criteria cuts off access to new bank loans. Sunac’s failure to make the interest payment on the October 2023 bond means bondholders can seek immediate repayment of the principal and interest, but the company said it had not yet received acceleration notices from those debtors. It has appointed legal and financial advisers to help assess its capital structure and liquidity, according to the filing. Trading in the company’s shares has been suspended since April 1 after Sunac did not deliver its annual results before March 31 as required by the Hong Kong stock exchange. Amid the red lines scheme, many developers have defaulted on their US dollar bonds, including China Evergrande Group, the second-largest home seller by sales last year in the country and the world’s most heavily indebted home builder. Shimao Group Holdings, founded by the property mogul Hui Wing-mau, proposed delaying payment of principal on a 500 million yuan note due May 22 for a year, according to a Shanghai exchange filing late on Monday. Like Zhongliang Holdings, Zhenro Properties, Guangzhou R&F Properties, Kaisa Group Holdings and Yuzhou Group have all asked their bondholders to exchange bonds due soon for new securities maturing later. China’s property market has shown no signs of recovery even after many local authorities relaxed measures to boost home sales and top executives emphasised the importance of stabilising the real estate sector.