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Shimao Group in China Defaults on US$1Bn Bond Payment

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Shimao Group in China Defaults on US$1Bn Bond Payment

The Shimao Group in China is said to have failed to make payment on a US$1 billion bond that matured Sunday. This is one of the largest defaults so far this year in China’s troubled property sector.

Since the authorities cracked down on excessive debt and rampant consumer speculation in 2020, giants such as Evergrande and Sunac are scrambling to make payments and renegotiate with creditors.

In the latest jolt, Shimao said it had not paid the principal and interest on a $1 billion offshore note. This created fears that the crisis may spill over into the wider economy.

Shimao, which is listed on the Hong Kong Stock Exchange, said it has noticed a decrease in contracted sales due to “significant changes to the macro environment of the Chinese property sector since the second half of 2021”.

According to the China property developer, despite refinancing and waiver negotiations, it wasn’t able to make some payments due to “challenging” market conditions.

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Currently, lenders have not indicated that they will take enforcement action since creditors have not requested accelerated repayment.

The Shimao Development Group in China develops residential, hotel, office, and commercial properties in major cities like Beijing and Shanghai.

According to Bloomberg News, it was China’s 14th largest developer by contracted sales last year.

The uncertain economic outlook has made it difficult for Chinese developers to attract homebuyers.

Chinese media reported that a company in Nanjing would accept truckloads of watermelons as a downpayment from farmers.

According to Bloomberg Intelligence analyst Kristy Hung, the contagion has spread from Evergrande to Sunac and now to Shimao.

This raises our concerns that the debt crisis has reached an unprecedented level in China.