China Fortune Land’s US$813 million of missed debt payments sparks fears of further defaults under Beijing’s ‘three red lines’ for property developers
- The Beijing-based developer appears to have fallen foul of tough new limits on borrowing designed to curb debt in mainland China’s property sector
- China Fortune Land, which was downgraded by Fitch on Wednesday, said it is actively raising money and has set-up a creditors’ committee
China Fortune Land Development, ranked 43rd by sales nationally last year, said it had overdue loans of 5.26 billion yuan (US$813.37 million) because of a liquidity shortage. Fitch Ratings downgraded the developer on Wednesday to reflect the “extremely high risk” of buying its debt.
The Beijing-based developer, which started out with a focus on industrial estates and urban property, said the default involves loans from banks and trust companies, but there was no delinquency on bonds, in an exchange filing late on Monday.
The company said it had 55.9 billion yuan of debt that had matured since the last quarter of 2020, and that it currently only has 800 million yuan in cash and cash equivalent that can be used, leaving a huge shortfall. It promised that it will not dodge its repayment obligations.
It might not be easy for it to keep that promise. Within a month, a US$530 million offshore bond will be due, then 27 billion yuan in bonds will mature between March and June, followed by another 10 billion yuan in the second half of the year, according to Fitch Ratings. The credit ratings agency downgraded the developer to “CC” from “CCC” at noon on Wednesday, having downgraded it from “B” a week earlier.