An affiliate of Chinese state-backed developer Sino-Ocean Group Holding Ltd. is adding to a wave of debt extensions among Chinese builders by seeking to delay a coupon payment as liquidity worsens further in the real estate sector.
Sino-Ocean Capital Holding Ltd. is proposing to set back its interest payment to October instead of April for its 6% dollar notes maturing October 2023, according to a consent solicitation document seen by Bloomberg.
The proposal would require approval from creditors holding at least 75% of the note’s outstanding value, according to the document. Failure to obtain approval would mean a default event is likely to occur on May 9, the end of the 14-day grace period for the semi-annual interest payment originally due April 25, according to the document.
The development suggests weaker support from Sino-Ocean Group, China’s 24th largest builder by sales, which holds a 49% stake in Sino-Ocean Capital, and raises questions about the ability of the major shareholder to service its own debt.
Record Defaults
While China’s developer-dominated high-yield dollar bonds rallied after the government started rolling out measures last fall to stem record defaults, a number of mid-sized companies are still facing a liquidity crunch as home sales post a slow recovery. A Bloomberg index tracking the notes has dropped for three consecutive months.
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Representatives of Sino-Ocean Capital have also told investors the company has engaged Haitong International to explore a number of options, including launching an exchange offer for its 6.25% notes due June 2023, said two investors involved in the talks, who asked not to be identified saying the discussions were private.
Officials from Sino-Ocean, the affiliate, and Haitong didn’t immediately respond to a request for comment.
Sino-Ocean Capital is also facing a winding-up petition in Hong Kong filed by Great Wall International Investment VIII Ltd., and a court hearing has been scheduled for June 7, Bloomberg has reported.
Sino-Ocean Capital owns 70% of Dasin Retail Trust's manager.
