Chinese builder of Hong Kong nano flats sinks as debt burden feeds US$1.9 billion stock sell-off
- Stock slumped on resumption of trading in Hong Kong despite steps taken by the developer to meet its offshore bond obligations
- Debt rating slashed by Moody’s this month on refinancing risk, citing weakening liquidity and amount of debt coming due over the next 12 to 18 months
The stock slumped 40 per cent to 35 HK cents at the close of Friday trading, taking the decline this year to about 87 per cent. The stock has lost US$1.86 billion in market value over the past 12 months since it reached its 2021’s peak on May 27 last year.
The slide came even as the developer said it was making arrangements to service the semi-annual coupon of US$12 million by May 30, within a 3o-day grace period, on a US$200 million 12 per cent bond due in October this year. It also confirmed having paid the interest on a US$175.7 million bond that was due in March this year.
Both junk-rated bonds have slumped in recent weeks to distressed about 20 and 30 US cents on the dollar, levels that typically indicate a high degree of default risk. The firm had 9.24 billion yuan (US$1.37 billion) of debt outstanding at the end of 2021, making up the bulk of its 13.1 billion yuan of borrowings, according to its annual report.
The cash crunch at Jiayuan, a mid-sized builder based in Nanjing in the eastern province of Jiangsu, is emblematic of the cracks in China’s housing market following a state-led clampdown on excessive borrowings.