More mainland developers face debt problems
Agile Property latest firm struggling with debt repayments with its bonds the worst in market
The weakest developers on the mainland are getting weaker as Agile Property Holdings became the latest company to struggle with debt repayments.
The number of publicly traded real estate firms with liabilities exceeding equity jumped to 133 out of 334, from 57 in 2007, data showed.
Notes of the Guangzhou-based Agile were the worst dollar bonds in the industry in Asia in the past month, losing 136 per cent in annualised terms, after its chairman was detained by prosecutors and it tried to extend loan maturities.
Concern was mounting that financial stress might "spill over" to builders that had a similar background or geographic coverage as Agile, Moody's Investors Service said, after home sales dropped 11 per cent in the first eight months of the year.
"Strong players will get stronger and weak players will remain weak," said Kaven Tsang, a senior analyst at Moody's. "Default risks of very small, liquidity-strapped property companies will be high."
Concerns have spread that more mainland property companies may fail to pay obligations since closely held Zhejiang Xingrun Real Estate collapsed in March under 3.5 billion yuan (HK$4.4 billion) of debt.
It will take some time before measures start to bolster property demand and help improve balance sheets, according to Viktor Hjort, the head of Asia fixed-income research at Morgan Stanley in Hong Kong.