CIFI Holdings, one of the biggest Chinese developers, missed a convertible bond issue, leading it to default. This default represents that no matter well-regarded real estate companies, they could encounter a dry up liquidity. The case is following the weak property sales as well as investors’ aversion to the sector. CIFI issued the HK$2.545bn. This is a 6.95% convertible bond which is due in April 2025. Then, the first coupon ended on October 8. CIFI’s trustee, China Construction Bank (Asia) sent a note to bondholders that it did not pay the coupon. Based on the note, it is a signal of default. A DCM banker argued that having passed through a situation of weaker names would have the impact. But now, everything is different, the big names also get the impact.
CIFI remarked during the filing on the Stock Exchange of Hong Kong that they are quite late in making interest and amortization payments. However, the company did not mention default. The property company blamed it on the missed payments due to a delay in remittance of cash offshore. This is from mainland China due to the long week holidays. But since September, the company has been downgraded by the three major rating agencies. It reflects the weakened credit profile as well as the rise of liquidity risks.
Fitch for instance has downgraded the issuer plus its bonds to CC last month. Before that, they withdrew the ratings, arguing that the company preferred to stop participating in the rating process. However, the previous Moody and S&P also lowered their ratings to B3 and B+. S&P before withdrew its rating this month to fulfill the company’s request.
