Chinese Yango aims to avoid defaults with chairman-backed bond swap, Real Estate News, AND RealEstate

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SHANGHAI: Chinese manufacturer Yango Group on Monday offered to swap U.S. dollar bonds for new notes personally guaranteed by its president as he struggles to free up money and avoid default on upcoming debt payments.

Yango’s liquidity crunch comes against the backdrop of a crisis at a big rival Evergrande Group in China, which has fueled concerns among investors around the world over the country’s deeply indebted $ 5,000 billion real estate sector and tightened access to finance for other developers.

Yango is offering $ 25 in cash and $ 1,000 in new notes for every $ 1,000 of existing bonds traded, he said in a Hong Kong Stock Exchange filing. The exchange offer applies to its US dollar notes due February 2023, January 2022 and March 2022, which have an outstanding face value of $ 747 million.

The new bonds are personally guaranteed by Lin Tengjiao, founder and chairman of Yango, according to the file. The Hurun Global Real Estate Rich List of March 2020 estimated Lin’s personal fortune at $ 2.4 billion.

Yango said he is also seeking investor support to change the terms of his other five outstanding dollar bonds.

He said the offer was part of “overall efforts to improve our liquidity, preserve options to stabilize our operations as a going concern, and avoid impending defaults and potential holistic restructurings of our debts and businesses. commercial operations”.

Tightening government policy, credit events and deteriorating consumer confidence have cut off refinancing opportunities for real estate companies “and put enormous strain on our short-term liquidity,” Yango said.

Stocks, bonds collapse

The announcement follows a report by financial information provider Redd on Friday that Yango asked holders of its onshore asset-backed securities (ABS) to refrain from requesting redemption for a year over concerns over ‘he would have a hard time paying this month.

On Monday, Redd announced that Yango had softened his offer with the intention of paying more than 10% upfront in cash, and a second installment in March, with the remaining principal being extended until November 2022. He did not whether the investors had accepted the offer.

Yango’s shares in Shenzhen fell 7.5% on Monday and are down nearly a quarter over the past week. The CSI300 real estate sub-index slipped 1.6% on Monday against a 0.4% drop in the blue chip index.

In the onshore bond market, the Shenzhen Stock Exchange halted trading in Yango Yuan bonds in April and August 2024 after they fell more than 30% that day.

“There is an ABS that matures on November 8, so it’s a bit dangerous. The onshore market is anxious,” said a Beijing-based portfolio manager who asked not to be named because he didn’t was not allowed to speak with the media.

National rating agency Dagong Global Credit Rating Co lowered its outlook for Yango to negative on Monday due to uncertainty over the source of funds for debt repayment. However, he kept the ratings of the company and its onshore bonds unchanged at “AAA”.

Yango did not immediately respond to Reuters’ request for comment.

In international In debt markets, Yango’s February 2025 7.5% dollar bond has fallen more than 20% at a haircut of around 85% of its face value, according to Duration Finance. Bonds from other Chinese developers also slumped, weighing on an Asian high-yield bond ETF, which fell more than 1%.

Yango has eight outstanding US dollar bonds with a total value of $ 2.24 billion and 14 outstanding yuan bonds with a value of 13.1 billion yuan, according to data from Refinitiv. Holders of the February 2023 notes, worth a total of $ 247 million, have the option to demand an early redemption on November 12.

Collateral damage

Evergrande narrowly avoided a catastrophic default for the second time in a week on Friday, making a last-minute payment on an overdue dollar bond coupon just before its grace period expired. Its shares ended by nearly 4% on Monday.

The Evergrande woes have caused collateral damage, with some other Chinese developers forced into formal default on their dollar bonds last month and others offering extended payment schedules.

Xinyuan Real Estate Co avoided a default on a dollar bond maturing in October by entering into an agreement with bondholders to swap maturing notes for new bonds and cash.

Ronshine China Holdings on Monday became the latest Chinese automaker to be downgraded by a global rating agency, as Fitch said it had downgraded the company’s rating to “B” with a negative outlook, citing uncertainties over refinancing “significant debt” “maturing.

Chinese developers face maturities on bonds worth a total of $ 92.3 billion next year, according to data from Refinitiv.

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