China’s real estate developer bond defaults are on the rise in the face of the debt crisis

Evergrande Group Photo: CFP

Some Chinese real estate developers, including Evergrande Group, CFLD and Tahoe, are facing liquidity issues, according to CRIC, a real estate research center on Wednesday.

The data showed that as of September 27, the number of real estate company loan defaults in 2021 was 39, 25 more than in 2020, for a cumulative amount of 46.75 billion yuan ($ 7.2 billion), which corresponds to an increase of 159 percent compared to the previous year.

Cong Yi, a professor at Tianjin University of Finance and Economics, told the Global Times on Thursday that the real estate companies’ debt crisis was because they had crossed the three “red lines” of the real estate market as recommended by China’s supreme market regulator avoid excessive funding.

In the short term, the debt problems could have some impact on China’s overall economic performance, Cong noted.

As of June 30, Evergrande’s total debt had grown to 1.97 trillion yuan ($ 305 billion) with total assets of 2.38 trillion yuan, according to the late August interim statement.

Consistent with the high level of indebtedness, the company’s interest-bearing debt at the end of June was 571.7 billion yuan, including one-year debt of 240 billion yuan.

As of September 4, CFLD had failed to repay a total of 87.89 billion yuan in outstanding debt, while Tahoe’s outstanding debt on July 30 was 43.7 billion yuan.

Fantasia Properties, another Chinese real estate developer, was downgraded to default or near default status by one of the top three credit rating companies, Fitch Ratings, after failing to repay $ 205.7 million in debt due Tuesday would have.

In addition, funding from 100 major Chinese real estate companies reached 109.19 billion yuan in the first nine months of 2021, down 21 percent from the previous year due to tightened government funding policies.

In the third quarter, these companies raised up to 287.2 billion yuan, down 38 percent year over year and the lowest level since 2018.

CRIC suggested that real estate companies will be more cautious with their lower funding volume investments in the fourth quarter.

The total maturity of the bonds over the period will reach 108.2 billion yuan, down 19 percent from the third quarter.

Global times

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