Bonds issued by Shanghai Shimao Co and Shanghai Shimao Construction Co, both owned by Shimao, were top gainers in Shanghai Stock Exchange’s corporate bond market on Friday
Bonds sold by subsidiaries of Shimao Group Holdings rose broadly in Shanghai on Friday (Dec 17) after a report that the Chinese developer plans to repay publicly-issued debts due this month.
Shimao has told trust firms that it plans to make payments on its publicly issued bonds and interest that are due in the fourth quarter, financial intelligence provider REDD reported.
Shimao also plans to pay migrant workers salaries before the Chinese New Year, REDD said, citing unidentified sources.
Bonds issued by Shanghai Shimao Co and Shanghai Shimao Construction Co, both owned by Shimao, were top gainers in Shanghai Stock Exchange’s corporate bond market on Friday morning.
A Shanghai Shimao bond that matures in September, 2024 climbed more than 7 per cent.
Chinese developers have been under enormous strain this year as regulators have sought to reduce leverage in the heavily indebted sector with rules capping their ability to issue new debt.
Shimao saw sharp falls in its shares and debt earlier this month, triggered by worries over an asset sale and cancelled apartment deals.
Rating agency Moody’s downgraded Shimao’s corporate family rating (CFR) to Ba3 from Ba1 on Friday, adding the rating remains on review for further downgrade.
The rating downgrade reflects Shimao’s increased refinancing risk due to its constrained funding access and sizable debt maturities over the next 6-12 months, Moody’s said in a statement.
The developer has asked for trust firms for short-term extensions of loans coming due, according to REDD.
It has asked trust firms to be patient and said it expects 10 billion yuan (US$1.57 billion) worth of cash to be released from presale escrow accounts from Jan 1, REDD reported.
Shimao’s biggest creditor, China Merchants Bank, plans to increase its loan exposure to Shimao – currently at 30 billion yuan (US$4.71 billion) – and plans to rally financial support for Shimao from other lenders, the report said.