HONG KONG: China Evergrande Group on Tuesday (Oct 12) missed its third round of bond payments in three weeks, intensifying market fears over contagion involving other property developers as a wall of debt payment obligations come due in the near term.
Some bondholders said they did not receive coupon payments totalling US$148 million on Evergrande's April 2022, April 2023 and April 2024 notes due by 0400 GMT on Tuesday, following two other payments it missed in September.
That puts investors at risk of large losses at the end of 30-day grace periods as the developer wrestles with more than US$300 billion in liabilities.
Evergrande did not immediately respond to a request for comment.
Markets are now counting down to an Oct 18-19 deadline when it will be formally declared in default if it still hasn't stumped up.
"It is pretty serious now and it looks like it is going to be a long and drawn-out process," said London-based Trium Capital fund manager Peter Kisler about Evergrande and the wider crisis.
"I don't see the recovery being particularly high," he said referring to what Evergrande bondholders would get if Evergrande gets broken up. "I think 20 cents (for every dollar of the bonds' original face value) is more or less fair."
Problems have already spread well beyond just Evergrande.
A total of US$92.3 billion bonds issued by Chinese developers will be due in the next year, Refinitiv data show.
"We see more defaults ahead if the liquidity problem does not improve markedly," said brokerage CGS-CIMB in a note, adding that developers with weaker credit ratings are having difficulty refinancing at the moment.
Trading of high-yield bonds remained soft on Tuesday following a rout in the previous session on fears about fast-spreading contagion in the US$5 trillion sector, which accounts for a quarter of the Chinese economy and often is a major factor in policymaking.
Shanghai Stock Exchange data showed the top five losers among exchange-traded bonds in morning deals were all issued by property firms.
Small developers Modern Land and Sinic Holdings were the latest scrambling to delay deadlines, after Evergrande and Fantasia missed their payments since September.
Modern Land's dollar bond due 2023 plunged 25 per cent to 32.250 cents on the dollar, while Sinic's bond due 2022 rose 12 per cent to 19.35 cents, yielding over 1380 per cent.
Modern Land, whose shares dropped over 3 per cent to a new low on Tuesday, had requested bondholders on Monday to delay a repayment due later this month for three months, while Sinic said it would likely default next week.
Aoyuan's bond due 2025 declined 3.5 per cent while Sunac's bond due 2024 lost 2.6 per cent.
On Monday, Fantasia Holdings' unit limited trading in its Shanghai bonds, which is often done ahead of defaults.
While global attention has been focused on missed dollar debt payments by Chinese property issuers, market indicators suggested that worries about contagion and a slowing economy are spreading further.
Market players say the sell-off, however, appears limited to more riskier bond names.
"The market is trading more rationally now, according to different quality and rating of the companies, rather than selling off on the whole sector," said Michael Wong, director at CP Securities based in Hong Kong.
The cost of insuring against a China sovereign default continued to rise on Tuesday, with five-year credit default swaps - which investors typically use as a hedge against rising risk - hitting its highest point since April 2020.
The option-adjusted spread on the ICE BofA Asian Dollar High Yield Corporate China Issuers Index pulled back to 2,061 basis points on Monday evening US time, just off its previous all-time high of 2,069 basis points on Friday.
Shares of several other property firms, however, fared better as markets bet on more loosening of policies following northeastern city of Harbin's measures to support property developers and their projects.
Top developers Country Garden and Sunac China both rose 2 per cent despite a 1 per cent drop in the wider market.
Evergrande's electric vehicles unit jumped over 10 per cent after it vowed to start producing cars next year.