Glorious Coughs Up Coupon Payment After Creditors Interview Lawyers

Glorious Property, the Shanghai-based real estate developer that missed missed debt payments repeatedly this year, has made good on a coupon obligation after bond holders sought legal advice, according to media reports.

The property firm belonging to troubled tycoon Zhang Zhirong paid the $26.5 million due on $250 million in 2018 bonds this month, after reports hit the press of the company’s creditors interviewing lawyers. Glorious recently announced to the Hong Kong stock exchange that it had failed to make a number of payments on debts this year, and had yet to renegotiate the obligations with creditors.

Glorious has $300 million in offshore bonds coming due on October 25th, according to Bloomberg, but had only RMB 204.9 billion ($32.2 million) in cash on hand at the end of June. The Hong Kong-listed developer is said to be shopping assets, as lenders appear unwilling to extend additional financing.

Where Did Glorious Come Up with the $26.5 Million?

Glorious’ ability to make good on its coupon obligation this month came as a surprise to some analysts after the company confirmed in its first-half financial statement on August 31st that it had lost RMB 996.6 million during the first half of the year, and had failed to meet debt payments during the period.

The company’s management also stated that they had missed additional payments since the end of June, raising concerns about their ability to pay off the principal of the bonds due on October 25th. Glorious has not since stated its sales for July, but its revenues for the first half of the year totalled RMB 342.4 million ($53.6 million) due to a lack of new projects to sell.

Both Moody’s and Standard & Poor’s have highlighted risks at Glorious this year, and the company’s October notes fell to 65.5 cents on the dollar this week according to Bloomberg.

Is Shanghai Bay on the Block?

Caught between tepid sales and anxious creditors, Glorious is said to be shopping existing assets to raise funds.

Among the projects that could be on the block are the latest phases in the 697,231 square metre (7.5 million square foot) Shanghai Bay project in the southern end of the city’s Xuhui district. The high-end mega-project is scheduled to start selling a new tranche of condo units this year, at prices ranging up to RMB 150,000 per square metre. (Which would make a modest 800 square metre home come in at around $1.9 million).

Unfortunately, for Glorious, the Shanghai Bay units will not be on sale in time to help meet its October bond obligations, and even then, the cash from the first round of condo sales is said to be ear-marked for paying off vendors and domestic creditors. Some analysts also raised doubts regarding the project’s target pricing, with recent sales from earlier phases at the development having sold for around RMB 70,000 per square metre.

This leaves creditors hoping that the recent uptick in Shanghai’s property market will convince an onshore lender to provide Glorious with bridge financing between now and October 25th. In the event that the developer can’t arrange new funds, offshore bond holders would be at the greatest risk in the event of any potential default.