Commentary on Political Economy

Monday 11 October 2021

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 Chinese Developer Modern Land Asks to Delay Bond Repayment

Property company seeks three-month extension for debt due

Chinese developer Modern Land is listed in Hong Kong. PHOTO: JEROME FAVRE/SHUTTERSTOCK


Oct. 11, 2021 1:15 am ET

Chinese property developer Modern Land (China) Co. 1107 -2.11% asked investors for permission to defer repaying a $250 million bond due later this month, in the latest sign of the financial stress that has gripped China Evergrande Group and many of its rivals.

Modern Land also said its chairman and president would together provide the equivalent of $124 million in loans, helping to shore up the group’s finances.

Restrictions on credit to the sector have helped trigger a crisis at Evergrande and put pressure more broadly on developers’ stocks and bonds. A default last week by Fantasia Holdings Group Co. on $206 million of dollar bonds caused the bond-market selloff to intensify.

Shares of Modern Land have fallen more than 40% this year. Its dollar bonds due March 2024 crashed to 25 cents on the dollar as of last Friday, according to Tradeweb, down from 72 cents at the end of September.


On Monday, Modern Land said it wanted to delay repaying its $250 million of 12.85% bonds due on Oct. 25 by three months, though it plans to buy back 35% of the bonds on the original maturity date.

Why China’s Evergrande Has Global Markets on Edge

Evergrande, China’s most indebted property developer, has kept global markets on edge and sparked protests at home as it struggles to survive. WSJ explains why the company’s crisis is raising questions about the state of the world’s second-largest economy. Photo: Alex Plavevski/Shutterstock

The delay is intended to improve liquidity, manage cash flows and “avoid any potential default under the notes,” Modern Land said. It is offering investors $1 for every $1,000 in face value of bonds they hold as a fee for consenting to the changes. It needs to secure at least 90% approval.

In a separate statement, Modern Land said its controlling shareholder, Chairman Zhang Lei, and President Zhang Peng would together provide a total of 800 million yuan, the equivalent of about $124 million, in shareholders’ loans within the next two to three months. The statement touted Zhang Lei’s “continuous commitment to the group and his unwavering confidence in the group’s businesses and development.”

Last week, Modern Land said its contracted sales for September of properties and car-parking spaces totaled about 3.56 billion yuan, or the equivalent of about $553 million. That was about 22% lower than the year-earlier period.

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