2015-02-02

Glorious Property Falls Into Debt Trap

Reuters: S&P cuts China developer Glorious's credit rating on refinancing worries
China's Glorious Property had its credit rating cut by Standard & Poor's on Tuesday, the latest red flag to be raised about Chinese developers' ability to service their debt.

S&P cut the rating by a notch to CCC, saying it was concerned about the company's ability to refinance $300 million of bonds that are due to mature in October. The agency warned there could be a further downgrade for the troubled borrower closer to the bond's redemption date.

The company's plans to deal with the debt tells the story of the real estate market as a whole: accelerate projects to recoup capital. The result is faster inventory growth and falling prices.

Xinhua: 恒盛地产身陷债务违约 遭标普下调评级 (Glorious Property in Default Trap)
"If these companies do not have any positive development, it will face some liquidity difficulties or need to deal with some cheap deal to repay debt."

  Ye Ao bank also introduced, "CCC +" mainly for no short-term difficulties, but the long-term sustainability of the company is questioned; "CCC-" means the company may default within six months.

In fact, over the past few years, the "debt" has been accompanied by Glorious Property vocabulary, and appear to be more serious this year. Because, on the Glorious ended the first half of 2014 data, the losses of 221.3 million yuan, and may not be a small number. Meanwhile, in addition to first-tier cities in the sales Nanjing, Changchun and other second and third tier cities, the Glorious repeated negative news now.

  As of press time, the reporter has been unable to contact the Glorious estate executives. But there is news that President Glorious Ding Xiangyang said in an interview that the company will increase the next two years, the layout of Shanghai, Nanjing, Beijing, Tianjin, Hefei and other second-tier cities, and gradually reduced until you exit the other three in the Northeast four-city project layout. At the same time, 2015 will accelerate the construction of the projects, increase sales, improve cash flow rate and reduce the debt ratio.

  In the survey, some industry analysts, told reporters that the biggest risk is still the Glorious "political risk", not only is the debt risk, "another listed company in Hong Kong is probably a lesson. But fortunately, the announcement to Look, they sacked the company and some politicians does not matter. "
You can tell the state of affairs when the lack of political risk is taken as a good sign.

The punchline: by one report, 90% of developers (mainly small and medium firms) are already insolvent, but the since the big firms are "too big to fail," the government will bail them out and the sector will avoid an economic chain reaction.
China Financial Intelligence chief financial experts Hao Wang findings for 2014 was more than 100 cities, said, "90 percent of the Chinese real estate developers have already insolvent, bank loans, trust, SME debt, private equity, private lending, high interest and other financing instruments together and 90% of all real estate firms' debt ratio above 150% -200%. "

  "Perhaps, not so exaggerated. Some SMEs may face some difficulties, but overall, the market is still healthy, still belongs to a small part of the problem." Xue Jianxiong insists.

  The four-city developers also believe that some real estate companies are now part of the "too big to fail" mean, because, once after another fall, involves more than just a company problem, there are other aspects of the problem. So, overall, fallen or breach, may still in the minority.

  Tenured professor of Economics, Texas A & M University, USA, Dean of Economics and Management Institute of Southwest University of Finance and sweet plow had, "International Finance" reporter suggested that in order just in case, "relevant or should the real estate industry as soon as possible stress test, try to avoid systemic risk. "

  "In fact, at this stage, the real impact of the largest, than the original sacked politicians and too close to the real estate business. For example, another listed company in Hong Kong." Xue Jianxiong think, "Perhaps, this is their The biggest risk. "correspondent Huang Ye

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