HONG KONG -- Modern Land China has become the latest developer from Asia's largest economy to miss a dollar bond payment, underscoring the stress spreading across the sector.
The company failed to pay interest and principal due on a $250 million bond, according to a filing on Tuesday with the Singapore stock exchange, where the bond is listed. The company said it is working with its legal counsel Sidley Austin and expects to engage financial advisors soon to help it through the crisis.
The repayment was not met, "Owing to unexpected liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment, the real estate industry environment and the COVID-19 pandemic faced by the group," the statement said.
Fantasia Holdings, Sinic Holdings and China Properties have already defaulted on offshore bonds this month, while China Evergrande Group narrowly averted a default by making a coupon payment on time last week. Evergrande faces another deadline on Friday. Global ratings agencies have already slashed their score on a record 44 Chinese developers this month as liquidity woes mount amid rising maturities.
Modern Land last Wednesday abandoned a proposal to extend repayment on the bond and the next morning halted trading of its stock and debt securities pending another announcement. The trade suspension remains in place, it said in the latest statement.
A regulatory crackdown on Chinese developers by authorities -- who are eager to rein in excessive leverage before it sparks a financial crisis -- has closed down funding avenues for developers. Under rules issued last year, companies can enhance borrowings only if their balance sheets meet net gearing, liquidity and other guidelines under the so called "three redlines" rules. The clampdown has pushed banks to cut their exposure to the sector, and companies have not tapped the offshore bond market in over a year.
Despite such moves, the missed payments by Evergrande and defaults by smaller rivals have sparked fears of contagion across the $50 trillion Chinese financial system in recent weeks.
S&P Global Ratings last month estimated that developers are due to redeem 480 billion yuan in domestic and offshore bonds over the next year, equal to almost a fourth of their free cash reserves. The first major round of maturities is set to come in January, with about $6.2 billion in offshore bonds due for repayment, according to brokerage CGS-CIMB.
Authorities have sought to reassure markets by saying the sector remains healthy and Evergrande, with $300 billion in liabilities, is an isolated case. Vice Premier Liu He told a Beijing forum last week that Evergrande risks are controllable and that reasonable capital demands from property companies are being met, according to a report by the official Xinhua News Agency. People's Bank of China Gov. Yi Gang has expressed similar views.
Indeed, some developers are showing signs that they are in relatively strong positions. State-backed China Overseas Land and Development and China Resources Land have been among the most active in land auctions amid waning demand. Others such as Country Garden and Hopson Development have either agreed to deals to buy assets from their struggling rivals or are looking to buy them.
Last week, Beijing-based Dalian Wanda Group applied to list its commercial property business in Hong Kong, with people familiar with the matter saying the group wants to raise between $3 billion and $4 billion.