Rosalind Evans
Sino Ocean, a leading Chinese real estate firm has halted its offshore debt payments, escalating concerns in the already struggling property sector.
Identifying itself among China’s premier 20 property developers, Sino Ocean declared last Friday through a stock exchange announcement that it would momentarily pause its payments on bonds denominated in US dollars. The firm also halted their trading, citing an ongoing debt reshuffling initiative.
This move comes as the company confronts intensifying liquidity challenges, largely attributed to a prolonged industry-wide sales downturn since 2021, adversely impacting its debt repayment capabilities.
Throughout the present year, the enterprise has encountered a steep drop in sales and an uptick in asset disposal uncertainties, the company disclosed.
Sino Ocean earnestly implores its creditors to grant them the time to navigate this liquidity predicament and craft an effective plan in consultation with its advisers.
Operational from Beijing, Sino Ocean’s portfolio spans residential and commercial properties, boasting around 600 projects in over 80 Chinese cities, including premium office spaces and malls.
Upon being approached for insights on the duration of the debt-restructuring process, potential effects on domestic debt payments, and potential legal ramifications, neither the developer nor its advising teams from Houlihan Loukey and Sidley Austin provided an immediate response.
Sino Ocean’s shares witnessed a sharp 10.6% fall in Hong Kong’s market last Friday, dropping to 59 Hong Kong cents (equivalent to 8 US cents).
As disclosed in its recent semi-annual report, the firm’s impending liabilities – debts due within the forthcoming year – have surged to approximately 60 billion yuan (around $8.4 billion).
This distressing update further heightens the prevalent anxiety surrounding China’s property domain. Notably, Country Garden, China’s top homebuilder the previous year, is currently entertaining the likelihood of a default. This follows their suspension of specific bond trading last month, aiming to contemplate debt restructuring.
Recent figures from the National Bureau of Statistics indicate a decline of 8.8% in China’s property investments during the initial eight months of this year, compared to the corresponding phase in the prior year. Sales, in terms of floor area, plummeted by 7.1% from January through August, relative to the initial eight months of 2022.
Moody’s has recently adjusted its perspective on the sector to a more pessimistic view, alluding to declining residential sales and persistent sector uncertainties.
Their analysis from June and July demonstrates a nationwide sales drop of nearly 20% compared to the same months in the previous year.
This effectively negates “the 11.9% growth observed in the initial five months, underlining a revived downturn in the residential real estate sector,” highlighted the rating agency.
Cities with lesser economic traction are predicted to face the significant impact of this sales slump due to continuous population migration. However, more significant cities might exhibit sturdier demand.
Moody’s also relegated the credit ratings of another Chinese property giant, China SCE Group, to non-investment grade this Thursday, citing significant debt and cash flow dilemmas. The firm’s ratings have been demoted from B3 to Caa1.
The unfolding scenario in China’s real estate sector serves as a sobering reminder of the intricate balance between rapid growth and sustainable financial practices. As leading developers grapple with debt and liquidity issues, the ripple effects will likely touch multiple facets of the economy. The global community watches closely, hoping for stabilization measures to ensure the long-term health of one of the world’s most significant property markets.
