Chinese developer Shimao Group said it failed to pay a $1 billion bond issue that matured on Sunday, one of the biggest defaults of its kind this year in the country’s troubled real estate sector.
China’s property sector has struggled since authorities began a crackdown on excessive debt and rampant consumer speculation in 2020, with giants like Evergrande and Sunac scrambling to make payments and renegotiate with creditors.
The crisis has raised fears the industry’s struggles could spread to the broader economy, and the latest shock came on Sunday when Shimao said it didn’t have the principal and interest for a $1 billion offshore note paid.
In a filing with the Hong Kong Stock Exchange, where it is listed, Shimao said it experienced a noticeable drop in contracted sales due to “significant changes in the macro environment of the real estate sector in China since the second half of 2021 and the impact” of Covid -19″.
The company added that it has attempted to negotiate refinancing and waivers but has been unable to make some payments due to “challenging” market conditions.
She said she received no notice of an accelerated repayment from creditors and the lenders said they would not take any enforcement action at this time.
Shimao develops residential, hotel, office and commercial real estate in China with projects in major cities such as Beijing and Shanghai.
It was China’s 14th largest developer by contracted sales last year, according to Bloomberg News.
China’s developers are struggling as homebuyers tighten their wallets amid an uncertain economic outlook.
A company in the eastern city of Nanjing said it would accept truckloads of watermelons as deposits from local farmers, according to Chinese media.
“Contagion has spread from Evergrande to Sunac and now to Shimao,” said Bloomberg Intelligence analyst Kristy Hung.
“This leads us to fear that the magnitude of the debt crisis is beyond the imagination of any market observer.”
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