Shimao Group Shares Tumble Over Unit’s Loan Default

This post was originally published on this site – Shimao Group Holdings Ltd.’s Hong Kong shares tumbled on Friday, with the price of bonds issued by flagship unit Shanghai Shimao Co. Ltd. also falling, after one of its units defaulted on a loan.

Shimao Group shares dropped 7.04% to HK$4.62 ($0.72) by 11:27 PM ET (4:27 AM GMT) after tumbling more than 17% earlier on Friday. A July 2022 Shanghai exchange-traded bond issued by Shanghai Shimao also fell more than 25%, triggering a trading pause over what the Shanghai Stock Exchange called “abnormal fluctuations.”

A Bloomberg index of total returns on China high-yield dollar bonds fell 1.9% on Thursday, the most in two months, a potential sign of a wider fallout.

Shimao Group suffered its biggest-ever bond rout on Thursday after a creditor said one of the developer’s units defaulted on a local loan. The unit failed to pay CNY645 million ($101.10 million) of a total CNY792 million due by Dec. 25, according to a notice from the China Credit Trust Co. that was sent to investors. China Credit Trust had demanded early repayment by Dec. 25 after the developer failed to meet installment requirements, the notice added.

However, the unit that missed the payment said in a stock exchange filing that the incident will not trigger investor demands for accelerated repayment of its debt in public markets. The filing added that the unit faces liquidity pressure and will take steps to quicken asset sales while insisting that the unit had not suffered any public-market debt default.

Meanwhile, Shanghai Shimao Investment Management on Wednesday pledged 265 million shares, or a 7.06% stake in Shanghai Shimao with Ningbo Commerce Bank on Wednesday to fund its operations, according to an exchange filing. Shanghai Shimao Investment Management and two other companies controlled by founder Hui Wing Mau have pledged a combined 560 million shares of Shanghai Shimao, or a 14.93% stake in the company, as of Thursday.