EnjoyLED

burst! Debt exceeds 1 trillion! China's first 100 billion state-owned real estate enterprise debt or thunderstorm...

Since last year, Evergrande's debt storm has caused waves in the market. Recently, there has been another heavy news in the real estate market.

On May 27, Greenland Group announced on the Hong Kong Stock Exchange that in order to improve the group's cash flow and liquidity, Greenland Holdings is seeking the holders of the US$488 million bond due on June 25 to agree to the proposed amendments and exemptions. These include extending the maturity date of the notes, adding a redemption right for the issuer to redeem all or part of the notes before maturity, prepaying 10% of the principal outstanding on the original maturity date, and cancelling the covenant to maintain the listing status of the notes.

In short, Greenland Group announced that the bonds due on June 25 of US$488 million could not be paid on time, and there may be a risk of default. According to Greenland's 2021 annual report data, the company reduced interest-bearing liabilities by 81.2 billion yuan that year, and the balance of interest-bearing liabilities was 240.6 billion yuan. Existing data shows that Greenland currently has 12 USD bonds in circulation, with an existing scale of US$3.961 billion. In addition, Greenland will have another five USD bonds due in 2022, with a total debt repayment scale of USD 1.1106 billion.

Greenland, which is backed by state-owned assets, is the only state-owned enterprise among the top 500 real estate companies that has announced a bond extension or default. Nowadays, there are many speculations on the Internet whether Greenland Group will become the first real estate state-owned enterprise in China to "thunder".

The protagonist of this thunderstorm is Greenland, a state-owned developer worth hundreds of billions of dollars. Before that, Greenland had never been in the top 20 in various rankings of Chinese real estate companies.

On the morning of May 27, Greenland held a conference call for fixed-income investors. Zhang Yun, the company's director and CEO, attended the meeting. At the meeting, the management expressed regret and regret for the rollover of the bonds due on June 25, 2022, with a coupon of 6.75% and US$500 million. Feel sorry.

In this announcement, Greenland stated that since its head office is located in Shanghai and almost all of its business is in China, the number of confirmed cases of COVID-19 has surged recently, and the sporadic outbreaks of COVID-19 and pandemic control measures in Shanghai and other parts of China have affected the Group's business. Operations, financial performance and short-term liquidity were adversely affected. As of the date of this announcement, some of the Group's planned projects and contracts have been shelved since the closure of Shanghai, accounting for approximately 50%.

On the same day, it was reported that Greenland held a conference call for fixed-income investors. The meeting stated that it would reduce interest-bearing liabilities and leverage through the collection rate. The collection rate last year was 96%, and this year will reach 130%. In addition, in other meetings, Zhang Yun, director and CEO of Greenland, revealed that Greenland plans to sell 200 billion assets in 3 years, 50 billion to 70 billion per year, including self-owned commercial, office buildings and hotels.

Is Greenland's debt storm really because of the Shanghai epidemic? In fact, China's real estate industry has always implemented a special management system for housing sales (pre-sale). Under the current management system, the sales proceeds from the sale of houses by developers will go into designated accounts supervised by government authorities, banks, developers and other parties. Therefore, each time a house is sold, the developer usually takes several months or even more than a year to withdraw and use the house payment. Even in the high-turnover era when first-tier developers are making great strides, it basically takes more than half a year for a real estate to start selling until it can be paid for housing sales, and the priority payment is for construction and other development funds. Nor will it be a priority for spending to pay down the company's debt.

The current round of Shanghai epidemic has only lasted about 2 months since the end of March. In other words, although Greenland stated that "the Shanghai epidemic has caused the closure of 50% of Greenland's sales offices across the country, and contracted sales have fallen sharply, with a year-on-year drop of 57% in April, and it will also be high in May." This does not constitute June 2022. 25 Reasons why a bond due at $500 million with a coupon of 6.75% could not be paid on time.

The real reason is that Greenland has been mired in debt for a long time, and the debt storm will come sooner or later. Will it become the second "Evergrande"? We will continue to pay attention.