Sichuan Languang defaults on US$139 million bond payment as debt woes spread among Chinese developers
- Sichuan Languang Development’s delinquency ‘will also trigger cross-defaults’ on local bonds and the firm’s offshore debt, said S&P Global Ratings
- Languang has US$1.05 billion of dollar bonds outstanding, according to Bloomberg
Chinese builder Sichuan Languang Development failed to repay a local bond, marking its first default in a domestic credit market grappling with rising debt failures.
The company was not able to raise enough funds for the repayment on a 900 million yuan (US$139 million) local bond that matured on Sunday, which amounts to a default, according to a statement on Monday from Languang to the Shanghai Clearing House. The builder said last week it might not be able to make the payment.
“The Languang default shows the deleveraging campaign will continue to fuel credit risk polarisation in Chinese bonds,” according to Natixis economist Gary Ng. He said spreads could eventually widen for offshore notes “as investors become more selective in seeking safer investments or demanding high yields to compensate the extra risks.”
