China Defaults Sow Property Cash Crunch Concern: Distressed Debt

The specter of default in China’s trust loans market is deepening the distress of property developers that also borrowed in dollars.

Eighteen companies owing $15.2 billion, from behemoth China Vanke Co. to junk-rated Glorious Property Holdings Ltd., have “material exposure” in excess of 10 percent to trust financing, a form of non-bank lending that’s helped homebuilders proliferate in China, Moody’s Investors Service said. This year alone, the number of Chinese junk developer bonds whose yields have increased to distressed levels has almost doubled to 19.