Panic-stricken investors drive down Chinese developer Agile’s bonds amid rumours about its ability to repay loans
- Hong Kong-listed developer quickly moves to reassure investors that it has funds to service its debt, including off-balance sheet loans
- Guangzhou-based developer sees prices of 11 US dollar denominated bonds slump
The prices of 11 US dollar dominated bonds of the Guangzhou-based Chinese developer plunged as panic-stricken investors sold the notes amid speculation that the company could struggle to make coupon payments due soon.
“The company only has one off-balance sheet loan due in November worth US$250 million and there is no more,” an Agile spokesman said in a briefing to investors. “We have enough money to pay our debts, both onshore and offshore.”
Agile had 38 billion yuan (US$5.9 billion) of cash as of the end of September, including 10 billion yuan of restricted cash, the spokesman said.
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Its most active US dollar-denominated bond due October 2025 declined to 85 cents on the dollar on Friday from 101 cents three months ago, while one of its perpetual bonds dropped to 75.5 cents.
Agile Group has one US$200 million bond maturing by the end of this year and a US$1.1 billion note maturing in 2022.
Investors, however, are worried about debt that is not on the financial reports of Chinese developers, according to analysts.
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Evergrande and other mainland property developers are likely to have shifted some of their interest-bearing borrowings to debt held off-balance sheet, as well as to commercial paper, wealth management products and perpetual capital securities, to appear to comply with Beijing’s deleveraging push, JPMorgan Chase analysts Karl Chan and Elaine Wu wrote in a research note earlier this month.
“It is possible that the real gearing could be even higher, as data on some off-balance sheet debt is not publicly available,” they said.
Agile, along with Evergrande, Guangzhou R&F Properties, China Sunac Holdings and Country Garden, are likely to have higher net gearing ratios once you adjust for off-balance-sheet debt, according to JPMorgan.
