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China’s Property Developers Face Record Wave of Maturing Debt

Chinese property developers face a record surge in maturing debt next year, as the country’s banking regulator says it’s monitoring risks from the cooling real-estate market.

The amount of dollar-denominated bonds that must be repaid in 2015 will jump to $2.83 billion, the most in data compiled by Bloomberg going back to 1993. Most Chinese builders listed on the mainland or in Hong Kong are behind fiscal-year sales targets and achieved less than 33 percent of their target in the first four months, analysis based on Bloomberg data show.

The China Banking Regulatory Commission will monitor the financial and cash-flow conditions of developers, and will support first-time homebuyers’ borrowing needs, Vice Chairman Wang Zhaoxing said at a briefing in Beijing today. Moody’s Investors Service revised its credit outlook for Chinese builders to negative in May after home sales slumped 10 percent in the first four months.

Chinese Premier Li Keqiang must balance efforts to staunch off-balance sheet lending known as shadow banking, which has been a key source of funding for many smaller property firms, while preventing widespread debt defaults. The March collapse of closely held developer Zhejiang Xingrun Real Estate Co. fueled speculation a shakeout among the nation’s almost 90,000 real estate companies could follow.

While the large, top-rated developers will be able to cope with their refinancing needs, smaller peers with ratings below B3 or Caa will face greater pressure, Franco Leung, an analyst with Moody’s, said in an interview yesterday.

“Smaller developers that have weak access to onshore bank loan financing and high trust-loan exposure, they would be most vulnerable,” he said.

Chinese builders raised 49 percent less through trusts last quarter as the collapse of Zhejiang Xingrun highlighted default risks.

Issuance of property-related trusts, which target wealthy investors, slid to 50.7 billion yuan ($8.1 billion) in the first quarter from 99.7 billion yuan in the fourth quarter, data compiled by Use Trust show.

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