Glorious Shares Drop Most Since August After Net Loss Widensby
Firm's $400 million of 2018 bonds decline most since March 31
Developer's net loss widened to 3.88 billion yuan in 2015
Shares of Glorious Property Holdings Ltd., the Chinese developer controlled by tycoon Zhang Zhi Rong, dropped the most in more than seven months after the company reported widening annual losses on Friday.
The stock slid 11 percent, the sharpest intraday drop since Aug. 25, to HK$0.81 as of 1:06 p.m. in Hong Kong. The firm’s $400 million 13.25 percent 2018 bonds fell 0.6 cents on the dollar, the sharpest decline since March 31, to 83.9 cents. The group’s net loss widened to 3.88 billion yuan ($599 million) in 2015 from a loss of 3 billion yuan in the previous year, it said in a filing Friday. Its borrowings increased to 25.5 billion yuan from 15.7 billion yuan.
China’s real estate industry, which accounts for about one third of economic output, is struggling to cut debt it heaped on following the global financial crisis. Glorious’s results highlight risks for investors even as the property sector rebounds, with home-price gains in the nation accelerating last month. The firm said last year it was selling assets to raise cash and negotiating with lenders to ease its financial burden after falling behind in servicing loans.
Glorious’s external auditor PricewaterhouseCoopers LLP noted the developer hadn’t repaid 5.2 billion yuan of loan principal and interest in accordance with the repayment schedules as of Dec. 31.
“These constituted events of defaults which resulted in cross-default of certain other borrowings amounting to 4.5 billion yuan as at 31 December 2015, which had original contractual repayment dates beyond 31 December 2016,” according to an extract of the independent auditor’s report contained in the Glorious filing Friday.
The company said in the results that the management is confident the lenders will not enforce their rights of requesting for immediate repayment and lenders of cross-default borrowings will not exercise their rights of asking for immediate repayment. Glorious also said it has taken certain measures to mitigate liquidity pressure and to improve financial position including negotiating with banks for loan renewal and extension, and accelerating pre-sales and collection of outstanding sales proceeds.
Two calls to Glorious’s investor relations department went unanswered.