China Fortune Land Set to Default on $530 Million Dollar Bond

March 1, 2021 03:27:05.813 GMT

(Bloomberg) -- A troubled Chinese real estate developer is poised to default for the first time on a dollar bond, raising concern that the government is reducing support for the property sector.

China Fortune Land Development Co. said Friday it hadn’t repaid a $530 million dollar bond that was due Feb. 28, according to a statement to the Singapore Exchange by the firm’s offshore unit that serves as the dollar bond’s nominal issuer.

The company hasn’t issued a follow-up public statement about the payment.

Doubts that the firm would be able to fully repay its debts have swirled since the start of the year as brokers and credit rating agencies cut their ratings, triggering a plunge in its shares and bonds. The default would be one of the most notable for a Chinese developer since Kaisa Group Holdings Ltd. failed to repay a dollar bond in 2015.

“The Chinese government’s stand on big companies, be it government related or LGFV-like, is no longer to support any form of debt payments,” said Chuanyi Zhou, a credit analyst at Lucror Analytics in Singapore.

China Fortune Land’s dollar bond due Feb. 28 fell 3 cents on the dollar to 40 cents as of 11:23 a.m., while its dollar note due 2025 dropped 1.9 cents to 35.8 cents, according to prices compiled by Bloomberg. The company’s shares fell as much as the 10% daily limit in Shanghai.

China’s regulators have stepped up efforts in curbing increases in developers’ debt, putting pressure on their refinancing abilities.

The developer is formulating a plan to address its liquidity problems and will hold discussions with its offshore bond investors to find a resolution, according to Friday’s statement.

China Fortune Land said it has some 11.1 billion yuan of total overdue debt, including bank loans, trust loans and offshore bonds, according to an exchange filing Friday.

The company has $4.6 billion in dollar bonds outstanding, including the note due last Sunday, as well as 36 billion yuan of onshore bonds, according to data compiled by Bloomberg. Three local bonds totaling 7.8 billion yuan will mature in March.

Founded in 1998, China Fortune Land made its name by developing sprawling industrial parks in Langfang, a city near Beijing where it’s headquartered. It then profited from selling residential projects close to the industrial parks.

By Ina Zhou
--With assistance from Tongjian Dong and Emma Dong.