Needless to say, they are not top of the state’s priority list
China’s property industry was flung into crisis in the middle of 2021 as companies such as Evergrande struggled to meet stringent government limits on debt levels while also continuing to build homes and pay creditors, both those in China and overseas. In the years since then, 39 companies with close to $100bn in dollar-denominated debts have defaulted. In recent weeks, a few have publicly announced proposals for how they will repay offshore creditors.
Of all those involved, foreign bondholders have been noisiest. That might be because they are lowest on the totem pole of parties likely to be compensated. The property crisis has devastated the offshore market for Chinese debts. There are $170bn-worth of outstanding dollar-denominated bonds issued by Chinese firms. According to Goldman Sachs, a bank, just a third of issuers have made payments on time.
Only recently have developers given a sense of what they are willing to offer the foreigners. So far the outlook is far from encouraging. Since the start of the year five companies have put forward restructuring plans, including Evergrande and Sunac, another highly indebted firm that recently defaulted. The proposals could become templates for other restructuring attempts over the years to come.
Both Evergrande and Sunac are also offering to swap debt for stakes in some of their operations. The former has been trying for several years to build an electric-vehicle business, and is willing to give creditors a slice. Sunac has a property-management arm that it is offering up. Such investments pay nice dividends when firms perform well, but offer far less protection than fixed-income investments when they collapse.
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