According to a Tuesday, March 7 announcement, Chinese developer Logan Group is “facing temporary liquidity issues” as its domestic borrowings are set to mature this month.
Logan Holdings, a wholly-owned subsidiary and the main domestic bond issuer of Logan Group made the announcement. It attributed the situation to a drop in house sales across the real estate sector. The debts totaled 5.3 billion yuan (839 million dollars) and included maturing bonds, put options, and asset-backed securities.
The company has paid 1.133 billion yuan (179 million dollars) through its own funds as of Tuesday. It said it will try to raise money by speeding up projects and assets sales.
Caixin reported on March 8 that Logan Group’s maturing debts mainly include “18 Longkon 02” and “19 Longkon 01” bonds and two related ABS (asset-backed securities) bonds of “Glory 11A” and “Longlian 08A.”
The balance of two ABS is about 1.568 billion yuan (248 million dollars), and Logan Holdings has repaid most of the money. The company is looking to extend the remaining two domestic debts.
During the extension period, the original interest rate remains unchanged, and the new interest will be paid off with the principal.
The proposals are currently in discussion with the holders.
Since February, the three major international credit rating agencies, Standard & Poor’s, Fitch, and Moody’s, have downgraded Logan Group’s rating several times. On March 7, Fitch downgraded Logan Group’s long-term foreign currency and local currency issuer default rating from “BB-” to “B+”, and at the same time downgraded its outstanding US dollar senior notes and other debt ratings.
Logan Group also has loan obligations with Guangdong-owned banks, including Ping An Bank and China Merchants Bank.
When China’s real estate industry crumpled in a liquidity crisis last year, Logan Group was regarded as one of the least vulnerable developers, but financial concerns have intensified this year.
On March 1, Finance Sina reported from Swiss investment banking firm USB that the off-balance sheet debt of Logan Group could reach 58 billion to 79 billion yuan (about 9 to 12,5 billion dollars), that is, 1.23 to 1.67 times the net debt reported at the end of June last year. This has caused transparency concerns among investors.
Fitch rating agency believes that the financial liquidity constraints of Chinese property developers will continue for a period of time this year, which may trigger more default events.