China Property Bonds Dive As Firm Seeks Delayed Bond Payment

China property bonds slumped on Monday after a developer asked to delay a paper's maturity, underlining default fears stalking markets as offshore bondholders of China Evergrande Group awaited news of $148 million in looming debt coupons, Andrew Galbraith reported for Reuters.

Photo Insert: China's property market fiasco has caused even investment-grade bonds to trade at low 80.

Expectations that Evergrande will make the semi-annual payments on its April 2022, April 2023, and April 2024 dollar notes due Oct. 11 are slim as it prioritizes onshore creditors and remains silent on its dollar debt obligations.

That has left offshore investors worried about the risk of large losses at the end of 30-day grace periods as the developer wrestles with more than $300 billion in liabilities.

In the latest sign of liquidity stress facing Chinese developers, Modern Land (China) Co. Ltd. on Monday asked investors to push back the maturity date of a $250 million bond from Oct. 25 to Jan. 25 in part "to avoid any potential payment default."

Modern Land's April 2023 bond with a coupon of 9.8% plunged more than 25% to 32.25 cents on the day, according to financial data provider Duration Finance, while the company's shares fell more than 2%.

Other property developers' bonds were also under pressure. Ronshine China Holdings's October 2022 bond fell 12.9% to 52.187 and Guangzhou R&F Properties Co.'s February 2023 bond tumbled 8.37% to 55.233.

"It's a disastrous day. Even investment-grade bonds are trading at low 80," said Clarence Tam, fixed income portfolio manager at Avenue Asset Management in Hong Kong.

"We think it's driven by global fund outflow. It's very rare to see minus 10 points... these IG quality bonds are usually liquid. And fundamentally we are worried the mortgage management onshore hit the developers' cash flow hard."

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