China’s SCE Group initiates offshore debt restructuring after default

China SCE Group has announced a non-payment incident related to a syndicated loan, which has triggered a default on its dollar-denominated bonds. The company, based in Xiamen, is the latest addition to a growing list of Chinese property developers grappling with defaults on their offshore debts, leading them to commence restructuring processes. However, it's worth noting that only a limited number have unveiled their restructuring terms thus far.
China Evergrande Group, a major player at the epicentre of the property sector's debt crisis, revealed last week that its primary unit in China was unable to issue new debt due to an ongoing investigation. This development complicated Evergrande's restructuring plan, which creditors were initially scheduled to vote on this month. Additionally, the market is keeping a close eye on China's largest private developer, Country Garden, to see if it can avoid another default by making a $15 million coupon payment before the grace period expires later this month.
In a filing made last week, SCE Group announced the suspension of trading in its four dollar-denominated bonds, citing declining sales and tightening liquidity since the second quarter as contributing factors to its decision. It also acknowledged that its "liquid cash and bank deposits may not be sufficient to meet its current and future obligations." The payment SCE failed to make amounted to $61 million, covering principal and interest on a March 2021 syndicated loan. This non-payment may potentially result in demands for early repayment from other creditors; however, SCE has not received such demands at this point.
The property sector, which constitutes a significant portion of China's economic activity, has faced declining investor confidence since 2021. A Beijing-led crackdown on credit accumulation by property developers triggered a debt crisis in the sector. In an attempt to bolster the market, China has recently implemented a series of support measures, including easing borrowing rules and relaxing home purchasing restrictions in certain cities. This led to a slight increase in new home prices in September, breaking a four-month downward trend, as developers accelerated project launches to take advantage of these supportive measures.
The decision by China SCE Group to embark on a debt restructuring process is emblematic of the ongoing challenges faced by the Chinese property sector. A string of defaults on offshore debt by various property developers has amplified concerns about the sector's financial stability. As these companies grapple with liquidity issues and declining sales, they are compelled to seek debt restructuring solutions in an attempt to navigate the challenging economic landscape.

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China’s SCE Group initiates offshore debt restructuring after default

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