Zhenro Asks Bond Creditors Not to Sue as Developer Crisis Continues

Zhenro Properties, a top 30 Chinese developer by contracted sales, jolted investors late last week with the news that it was asking holders of a $200 million bond due in March to refrain from default claims as the company deals with a cash crunch.

The Shanghai-based builder had announced in early January that it would fully redeem the senior perpetual note. But since then it experienced short-term liquidity pressure due to limited access to external capital to refinance its existing indebtedness, it said Friday in a filing with the Hong Kong stock exchange.

Zhenro also experienced “a noticeable decline” in its contracted sales in recent months, including a 29.5 percent year-on-year plunge in January. The company has called a 14 March meeting at which it will formally ask shareholders to waive claims against Zhenro if it fails to redeem the note on time.

“The company anticipates that the market condition in the real estate sector remains under pressure in 2022, and therefore, in the absence of a sharp recovery in the market and a resurge of various financing options, the company remains cautious about its liquidity in the near term,” Zhenro chairman Huang Xianzhi said in the HKEX filing.

Reversal of Fortune

Zhenro’s shares and bonds had slumped in the last 10 days amid market chatter that the company might struggle to redeem the $200 million bond.

The U-turn by a developer seen as having a relatively solid financial footing sent Zhenro’s shares tumbling more than 13 percent to an all-time closing low of HK$0.75 ($0.10) in Monday trading.

In the wake of defaults and asset fire sales by mainland developers like China Evergrande and Shimao, the list of financially troubled property firms continues to grow. Last week, top 20 builder Yango Group missed $27.3 million in interest payments after a 30-day grace period lapsed.

Then on Monday, DaFa Properties announced to the HKEX that the company and a subsidiary had been hit with a winding-up petition in relation to outstanding senior notes with a principal amount of $15 million. DaFa said it would oppose the petition “vigorously” and apply to the High Court for a recognition order.

Ronshine Repurchase

With mainland authorities continuing to press developers to reduce leverage, Ronshine China Holdings announced on Friday that it had sold its 55 percent stake in a residential joint venture in the Zhejiang port city of Ningbo with Hangzhou-based investment firm Zhejiang Hailiang Group for RMB 421.2 million ($66.5 million). The buyer of the stake in the completed project is a unit of Hailiang, with Ronshine indicating that it would use the proceeds of the disposal to pay down debt.

Just two days later, Ronshine declared in a subsequent notice to the Hong Kong exchange that, after having earlier announced a plan to repurchase a set of 10.5 percent senior notes due this year, that it had completed the cancellation of $62.5 million of the bonds’ principal. That repurchase, which was completed last week, represented 12.49 percent of the aggregate principal amount of the notes issued.