Sunac China may miss instalment payment on 4 billion yuan bond as lockdowns pile pressure on beleaguered Chinese developer

Sunac China Holdings may miss an instalment payment on a 4 billion yuan (US$598 million) onshore bond because of a liquidity crunch, in a fresh sign that China’s pandemic curbs are plaguing the already beleaguered property developer.

Sunac Real Estate, a wholly-owned subsidiary of the country’s fourth-largest developer, said in a statement on Friday evening that it was not able to arrange sufficient funds to make the payment due on June 30 after sales by its parent in the first five months of this year plunged 59 per cent.

“The company will work out an adjusted payment plan based on the financial conditions,” the statement said. “We will keep communicating with the bondholders.”

Sunac extended the 4 billion yuan bond – which was originally due on May 15 – by 18 months from April 1 after reaching an agreement with creditors.

It completed the first instalment payment of 400 million yuan, or 10 per cent of the principal, on May 15, and was supposed to repay another 400 million yuan in the second instalment on June 30. Sunac Real Estate said the cash for the second instalment would not be ready before the deadline.

“Lockdowns and standstill orders [to battle the Covid-19 pandemic] in cities such as Shanghai have exacerbated a sluggish property market and ratcheted up pressure on those debt-ridden developers,” said Wang Feng, chairman of Shanghai-based financial services group Ye Lang Capital. “The vicious cycle will continue now that business activities in some major cities have not returned to full normality yet.”