Chinese property firms to face uphill battle in 2024 bond repayments

December 29, 2023 (MLN): Many non-defaulted privately-owned Chinese property developers will continue to face challenges making bond repayments in 2024 due to sluggish new home sales, impaired access to debt capital markets and the need to prioritize project construction, says Fitch Ratings.

Fitch expects some non-defaulted private developers to postpone principal repayments via debt restructuring or even defaults, as banks remain highly selective towards new loans to developers, despite the central government’s guidance for banks to accelerate lending to the sector.

Non-defaulted private developers will need to repay a total principal amount of ¥39.3 billion and $5.5bn in the onshore and offshore bond markets, respectively, next year, above their 2023 maturities of ¥34.6bn and $3.9bn.

In comparison, most non-defaulted state-owned developers’ near-term repayment risk is manageable given their stronger market positions and robust funding access.

Their maturing onshore and offshore bonds will hit ¥328.7bn and $6bn, respectively, in 2024, up from their 2023 maturities of ¥255.1bn and $4.9bn.

Although defaulted developers’ ability to service capital-market debt will remain very limited, a few recent cases suggest some of them that pledged to make installment principal repayments may offer small cash recoveries.

For example, Country Garden Holdings Company Limited and its onshore operating subsidiary repaid 2% of the principal of four extended onshore bonds in November, according to Dealing Matrix, while CIFI Group Co., Ltd. paid 2% of the deferred principal of an onshore bond.

Sixteen defaulted developers are scheduled to repay CNY10.9bn of principal on onshore bonds via installments in 2024, up from CNY8.5bn in 2023.

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