(Add details about the offer, bond price movements, fund manager commentary and background)
By Andrew Galbraith
SHANGHAI, Nov. 1 (Reuters) – Chinese developer Yango Group on Monday offered to swap some of its U.S. dollar bonds for new notes personally guaranteed by its chairman as it struggles to free up cash and avoid to default on upcoming debt payments.
Yango’s liquidity crunch comes against the backdrop of a crisis within the China Evergrande group, which has raised concern among investors around the world over the country’s deeply indebted $ 5,000 billion real estate sector, and restricted access to funding 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 filing. 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.
SHARES AND BONDS WEAKEN
The announcement follows a report by financial information provider Redd on Friday that Yango asked holders of its asset-backed securities (ABS) to refrain from requesting a refund for a year over concerns that he would have a hard time paying this month.
Yango shares in Shenzhen plunged 7.5% on Monday and fell nearly a quarter last 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.
“ABS 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 was not authorized. to talk with the media.
In international 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.
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 woes have caused collateral damage, as some other Chinese developers were forced into formal default on their dollar bonds last month.
But a developer, Xinyuan Real Estate Co, avoided a default on a dollar bond maturing in October by making a deal with bondholders to swap maturing notes for new bonds and cash. (Report by Andrew Galbraith, edited by Muralikumar Anantharaman)
Our standards: Thomson Reuters Trust Principles.