High-Yield Bonds Fall as Zhenro Worries Weigh: Evergrande Update By Bloomberg

(Bloomberg) — Chinese high-yield dollar bonds fell as concern about the financial health of Zhenro Properties Group Ltd. weighs on the market. 

The developer is seeking to extend the maturities of about $1 billion of debt due this year because it may not have enough capital to meet its obligations, it said in an exchange filing late Monday. Worries about Zhenro may undermine the government’s efforts to stem financial contagion in the sector and further drive up financing costs for property firms that need to repay almost $100 billion of debt this year.

The heightened concerns about Zhenro come as the broader Chinese market is under pressure, with technology stocks dropping for a third day amid signs of a fresh crackdown on the sector. There’s still room for China to cut interest rates and the bank reserve requirement ratio, the China Securities Journal reported.

Key Developments:

• Zhenro Seeks More Time to Pay $1 Billion in Bonds Due This Year
• Tencent Quashes Talk of New Crackdown as Tech Wipeout Deepens
• Chinese Developer Fantasia’s Directors Sued by Bondholder
• China Home Prices Barely Fall in Sign of Hope for Builders 
• China’s Latest Default Warning Takes Shock Factor to Extreme
• Hedge Funds That Won Big in China’s Bond Meltdown Now See Risks

China High-Yield Dollar Bonds Fall as Developer Worries Persist (10 a.m. HK)

Chinese high-yield dollar bonds fell 0.5 cent to 1 cent Tuesday morning, according to credit traders. Shimao Group Holdings Ltd.’s 6.125% bond due 2024 was indicated down 0.6 cent on the dollar at 43 cents, Bloomberg-compiled prices show as of 9:54 a.m. in Hong Kong.

Zhenro’s 5.98% dollar note due April was indicated slightly lower on Tuesday morning at 19.6 cents on the dollar, according to Bloomberg-compiled data. 

China Tells Banks, SOEs to Report Exposure to Jack Ma’s Ant (9:26 a.m. HK)

Chinese authorities told the nation’s biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group Co., renewing scrutiny of billionaire Jack Ma’s financial empire, according to people familiar with the matter.

Multiple regulators, including the banking watchdog, recently told institutions under their oversight to closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up to January, said the people, asking not to be identified as the matter is private. 

Yango Group Bondholders to Meet After Dollar Bonds Default (9:12 a.m. HK)

Holders of Yango Group’s 6.92% yuan bond due 2025 will hold a meeting on Feb. 28 after two dollar bonds default triggered cross-protection clauses, according to a statement on Chinamoney.com.cn. 

Developer Zhenro Proposes Maturity Extension With Bond Swap (6:20 a.m. HK)

Zhenro is proposing a maturity extension on five dollar and yuan notes due in 2022 for new bonds, which would mature March 2023 and bear interest of 8% per annum. The developer said that if it can’t complete its exchange offer and consent solicitation, it may not be able to repay some of the debt and meet its financial commitments. 

The proposal comes days after Zhenro asked bondholders to waive any default claims that may arise from a failed redemption of a $200 million perpetual note on March 5. That prompted Fitch Ratings to cut Zhenro’s long-term debt rating to C from B, saying the request amounted to a “distressed debt exchange.” Moody’s Investors Service followed suit. 

China May Cut Interest Rate, Reserve Ratio Further: Sec. Journal (6:51 a.m. HK)

There is still room for China to cut interest rates and the bank reserve requirement ratio, although the urgency of monetary easing has declined following a major increase in credit supply in January, China Securities Journal says in a front-page report, citing analysts.

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