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China developer Shimao Group seeks ABS extensions; shares, bonds sell off

SHANGHAI/HONG KONG (Reuters) -Chinese developer Shimao Group Holdings’ default on a trust loan payment and efforts to delay payments on asset-backed securities sent its shares and bonds tumbling on Friday, underscoring the continued stress in China’s property sector.

Shimao Group’s unit Shanghai Shimao Construction has proposed extensions on maturities for two asset-backed securities (ABS) due this month totalling 1.17 billion yuan ($183.50 million), three sources with knowledge of the matter told Reuters.

The proposals would see the company repay 10% of the principal in January, 5% each month from February through November, and the remaining 40% in December, the three sources said.

One of the sources said that the company and ABS holders were currently in negotiations, but that the proposals were not likely to meet with approval from holders without credit enhancements.

“If the negotiations are not successful it will trigger cross-default clauses involving other bonds,” the source said.

Shimao declined to comment.

News of attempts to delay ABS maturities, first reported by financial news provider REDD, comes a day after a trust company, China Credit Trust Co, said that Shimao had defaulted on a loan after missing a 645 million yuan ($101.10 million) payment.

Shanghai Shimao Construction said in a filing on Friday that it was in talks with China Credit Trust to resolve the outstanding payment, and that the missed payment would not accelerate payment requests in the open bond market.

Shimao’s Group’s Hong Kong shares plunged more than 18% shortly after trading began Friday on investor concerns over the company’s liquidity stress. They were down more than 7% at .

Shanghai exchange-traded bonds issued by its unit Shanghai Shimao Co tumbled more than 20%, triggering trading pauses over what the Shanghai Stock Exchange said was “abnormal fluctuations”.

Three additional Shanghai Shimao bonds fell between 13% and 14% on Friday morning, exchange data showed. The six bonds were quoted at distressed levels of 40%-60% off their face value.

($1 = 6.3760 yuan)

© Reuters. FILE PHOTO: A man walks past a wall carrying the logo of Shimao Group, with residential buildings and the financial district of Pudong seen in the background, in Shanghai, China January 1, 2013. REUTERS/Stringer

Source: /Reuters

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