Big Shanghai Property Developer Defaults On Debt
Another big Chinese developer has defaulted on its loans, throwing a further blow to the world's second largest economy's faltering real estate sector, Laura He reported for CNN Business.
Photo Insert: Shimao Group's MiniMax Premier Hotel
According to a company filing with the Hong Kong stock exchange, Shanghai-based Shimao Group failed to pay the interest and principal on a $1 billion bond due Sunday. According to the offering contract, the bond had no grace period for the principal.
Shimao's first missed debt payments on a dollar bond comes after the company has been dealing with rising financial difficulty for months.
Since 2020, when Beijing began cracking down on excessive borrowing by developers in an attempt to rein in their huge debt and restrict runaway home prices, China's real estate sector has been lurching from one crisis to the next.
The troubles grew considerably last fall, when Evergrande, China's second largest property developer, began trying to acquire funds to repay lenders.
With around $300 billion in liabilities, the troubled company is China's most indebted property developer. Fitch Ratings designated it a defaulter in December.
Shimao Group has a considerable amount of debt maturing in 2022, according to Moody's assessments earlier this year, including $1.7 billion in bonds owned by overseas investors, 8.9 billion yuan ($1.4 billion) in bonds held by Chinese investors, and "sizable" offshore bank loans.
Shimao, founded in 2001 by entrepreneur Hui Wing Mau, creates large-scale residential projects and hotels throughout the country. It owns Shanghai Shimao International Plaza, one of Shanghai's largest skyscrapers in the city center.
In March, the company anticipated that its 2021 net profit would be down approximately 62 percent from the previous year, owing primarily to the "harsh" environment facing the real estate sector. It then postponed the announcement of its 2021 results, blaming the Shanghai lockdowns.