Delinquent Shimao, named Kaisa units and shamed when defaults rise

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SHANGHAI (Reuters) – Real estate firms controlled by developers Shimao Group Holdings, Kaisa Group Holdings and Greenland Group were named and embarrassed on a list of Chinese companies that are “consistently overdue” with commercial paper payments.

According to the list published by the Shanghai Commercial Paper Exchange, the total number of these defaulting companies rose 26% in December from the previous month.

The rise in defaults on commercial papers – a popular short-term debt instrument Chinese developers use to delay payments to suppliers – shows ongoing liquidity stress in the real estate sector despite some monetary easing.

The list also includes an increasing number of bad debts from building materials suppliers and decoration companies, suggesting that home builders’ debt problems could escalate.

According to the list published on the exchange’s website, a total of 484 companies with at least three commercial paper payments were overdue between August 1 and December 31.

In December there were 100 more companies than in November, 95 of which were in the real estate sector or almost a fifth of the total.

Four of the names are project companies of the developer Shimao Group, which is discussing payment agreements with creditors last week after announcing a default on a trust loan.

The list, which does not include financial figures, also includes real estate firms controlled by the Kaisa Group, which is also struggling to repay investors, according to a Reuters analysis of the companies.

Also on the list are companies controlled by Greenland, Risesun Real Estate Development Co, China Grand Enterprises (CGE), Zoina Group and Seedland.

Shimao and Kaisa did not immediately respond to requests for comment and Greenland declined to comment. Risesun, Zoina, Seedland and CGE could not be reached for comment.

China’s CSI 300 Real Index was down 1% on Wednesday morning after falling as much as 3.2%, while the Hang Seng Mainland Properties Index lost 1.4%.

Real estate bond performance was mixed, with a Shimao bond dropping 18% in Shanghai.

China’s commercial paper market was re-examined in 2021 when regulators called for greater disclosure as part of efforts to contain skyrocketing real estate debt.

Non-interest-bearing commercial paper has increasingly become a source of funding for developers excluded from other funding channels.

China Evergrande Group, the world’s most heavily indebted developer grappling with a debt crisis, owes more than 200 billion yuan ($ 31.42 billion) in commercial paper.

($ 1 = 6.3644 Chinese Yuan)

(Reporting by Andrew Galbraith and Samuel Shen; Additional reporting by Clare Jim; Editing by Edwina Gibbs and Jacqueline Wong)

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